management report and consolidated · management report and consolidated accounts 2017 management...

MANAGEMENT REPORT AND CONSOLIDATED ACCOUNTS 2017

MANAGEMENT REPORT AND CONSOLIDATED ACCOUNTS 2017MANAGEMENT REPORT AND CONSOLIDATED ACCOUNTS 2017 MANAGEMENT REPORT AND CONSOLIDATED ACCOUNTS 2017

1 LETTER TO THE SHAREHOLDERS .......................................................................................................................................42 SONANGOL E.P. ...................................................................................................................................................................8

2.1 BUSINESS MODEL OF SONANGOL, E.P. .......................................................................................................................102.2 CORPORATE BODIES .....................................................................................................................................................14

3 PERFORMANCE SUMMARY ...............................................................................................................................................183.1 EXECUTIVE SUMMARY ..................................................................................................................................................203.2 OPERATING PERFORMANCE – EBITDA ........................................................................................................................213.3 OPERATING PERFORMANCE – NET INCOME ................................................................................................................223.4 INVESTMENTS ..............................................................................................................................................................22

4 PERFORMANCE BY BUSINESS SECTOR .............................................................................................................................244.1 CONCESSIONAIRE.........................................................................................................................................................26

4.1.1 EXPLORATION ......................................................................................................................................................274.1.2 CRUDE OIL & GAS PRODUCTION ..........................................................................................................................304.1.3 ECONOMIC MANAGEMENT OF CONCESSIONS ....................................................................................................394.1.4 CONCESSIONAIRE EXPORTS ................................................................................................................................40

4.2 PRIMARY VALUE CHAIN – UPSTREAM SEGMENT ........................................................................................................424.2.1 PRODUCTION OF CRUDE OIL OF SONANGOL INVESTIDORA................................................................................424.2.2 GAS PRODUCTION OF SONANGOL E.P. ................................................................................................................43

4.3 PRIMARY VALUE CHAIN – MIDSTREAM SEGMENT .......................................................................................................444.3.1 REFINING BUSINESS ...........................................................................................................................................444.3.2 CRUDE OIL, REFINED AND GAS TRANSPORTATION BUSINESS ..........................................................................47

4.4 PRIMARY CHAIN – DOWNSTREAM SEGMENT ..............................................................................................................484.4.1 LOGISTICS BUSINESS ..........................................................................................................................................494.4.2 DISTRIBUTION BUSINESS ....................................................................................................................................514.4.3 INTERNATIONAL SALES .......................................................................................................................................53

4.5 NON-NUCLEAR BUSINESS ...........................................................................................................................................574.5.1 AVIATION - SONAIR ..............................................................................................................................................574.5.2 TELECOMMUNICATIONS – MSTELCOM ................................................................................................................584.5.3 HEALTH – CLÍNICA GIRASSOL .............................................................................................................................594.5.4 REAL ESTATE MANAGEMENT – SONIP ................................................................................................................604.5.5 TRAINING – ACADEMIA SONANGOL .....................................................................................................................61

4.6 CORPORATE & FINANCING ...........................................................................................................................................624.6.1 FUNDING ..............................................................................................................................................................624.6.2 HUMAN RESOURCES ............................................................................................................................................624.6.3 ORGANIZATION AND CORPORATE PROCESSES ..................................................................................................64

5 COMMITMENT TO SOCIETY ................................................................................................................................................666 PROSPECTS FOR THE FUTURE ..........................................................................................................................................70

6.1NEW PRODUCTION ........................................................................................................................................................726.2 REFINERY .....................................................................................................................................................................736.3 TRANSFORMATION PROGRAM .....................................................................................................................................73

7 PROPOSAL FOR THE APPLICATION OF THE RESULTS .......................................................................................................747.1 RESULTS AND APPLICATION PROPOSAL .....................................................................................................................76

8 ACRONYMS AND ABBREVIATIONS .....................................................................................................................................78

SUMMARY OF GENERAL INDEX

00SUMMARY OF GENERAL INDEX

MANAGEMENT REPORT AND CONSOLIDATED ACCOUNTS 2017MANAGEMENT REPORT AND CONSOLIDATED ACCOUNTS 2017 MANAGEMENT REPORT AND CONSOLIDATED ACCOUNTS 2017MANAGEMENT REPORT AND CONSOLIDATED ACCOUNTS 2017 MANAGEMENT REPORT AND CONSOLIDATED ACCOUNTS 2017

LETTER TO THE SHAREHOLDERS

01

MANAGEMENT REPORT AND CONSOLIDATED ACCOUNTS 2017 MANAGEMENT REPORT AND CONSOLIDATED ACCOUNTS 2017

6 7

LETTER TO THE SHAREHOLDERS01

2017 was very favourable to Sonangol, E.P. and its subsi-diaries, since the international market recovered from the sharp decline of previous years as a result of the improvement in the foundations of demand and supply of crude oil, alongsi-de with the economic growth in the world economy.

Crude oil production in Ango-la amounted to 595,810,124 barrels, the equivalent to a daily average of 1,632,357 barrels. Compared to the previous year, the volume of production decreased 5%. This decrease is explained by the operational constraints in the main pro-duction blocks, by the decrea-se in activity in the Angolan oil industry and by the lack of sanctioning of new development projects.

However, the increase of appro-ximately 19% in oil export prices more than offset this decrease. Net income for the year amoun-ted to AOA 27.25 billion, a 107% increase when compared to 2016, reflecting the gains from the strategy adopted by OPEC.

The appointment of a new Board of Directors in November 2017 was received with a great sense of responsibility. Its main objec-tives are to regenerate the com-pany, in order to transform it

into an integrated and efficient National Oil Company, focused on the primary value chain and initiate efforts to increase the domestic production capacity of oil derivative products.

Since then, significant steps were taken by the current Board of Directors to re-launch the image of Sonangol as the National Concessionaire and a trustworthy oil company and to re-launch exploration and production of crude oil and na-tural gas, approaching the main players in the sector.

We actively participate in the task forces to discuss the fundamental issues regarding the improvement of the per-formance of the national oil sector, namely the principle of tolerance and contractual flexibility, exploratory activity within the development areas, reduction of bureaucracy in public tenders, normalization of the abandonment funds and the legal regime that will allow the monetization and development of gas resources.

Several agreements were held with the main Operators of the sector to, among others retake oil exploration activities, opti-mize production and transfer knowledge to national fra-meworks.

We held the public tender for the selection of investors for the construction of a large refi-nery in the city of Lobito and a small refinery in the province of Cabinda.

The foundations for the restruc-turing of Sonangol have been laid, through a Regeneration Program. This extensive and comprehensive program inclu-des the analysis and evalua-tion of the oil exploration and production business, the crude oil refining, the liquefied natural gas business and the liquefied petroleum gas, fuel logistics, distribution and supply of oil derivatives, business continuity, corporate finance, non-core bu-siness, investments and regula-tory framework.

This Program will last 30 months, with concrete actions that can be implemented in the short term and others in the long term. It will also include a change management program, digitalization and information systems and knowledge transfer through Academia Sonangol.

All these achievements would not have been possible without the vote of confidence granted by our shareholder and the un-selfish effort of our employees, business partners, customers

and suppliers, who have contri-buted a lot to the strengthening of the company.

We began a new cycle in which we will focus on the realign-ment of the company in its core business, achieving greater ef-ficiency and effectiveness of or-ganizational performance, with the contribution and recognition of all employees. To do this, we must be humble, dedicated and have discipline, serious-ness, protection of information, knowledge, ability, flexibility, teamwork, rigor in analysis and weighting in decision-making and firmness to understand all the players of the hydrocarbon industry.

On behalf of the Board of Direc-tors, I am grateful and reaffirm the commitment to continue to strive to ensure the stability and sustainability of Sonangol by strengthening its role as a bulwark of the country’s eco-nomy and social development.


SONANGOL E. P.02


10 11

SONANGOL E. P.

2.1 BUSINESS MODEL OF SONANGOL, E.P.

02

In 2017, Sonangol E.P. developed its activities through 18 subsidiaries, being generally responsible for defining strategic lines, providing guidance, supervision and mana-gement support, especially in the decision-making process. These companies operated on the market in a three-dimensional form, na-mely:

• Sonangol, E.P. performs the function of National Concessio-naire, having been granted by the State the mining rights for the exploration, research, develo-pment and production of liquid or gaseous hydrocarbons. As a national Concessionaire, it is au-thorized to associate with foreign or national entities to develop oil operations in the national territory, which can be perfor-med in the form of association agreements, production sharing agreements and risky service agreements.

• In addition, Sonangol E.P. acts as an integrated oil and gas com-pany, being a centralized opera-ting holding company, constituted by the following companies in its primary value chain:

» Exploration and Produc-

tion (Upstream): consists of a group of subsidiary compa-nies whose main activity is the exploration, development and production of hydrocarbons (crude oil and natural gas), namely:

- Sonangol Pesquisa e Pro-dução; - Sonangol Hidrocarbonetos

Internacional; - Sonangol Gás Natural.

» Refining and Transport (Midstream): gather refining and shipping companies for crude oil and refined products, namely:

- Sonangol Shipping Holdings Limited; - Sonangol Refinação.

» Logistics and Distribution (Downstream): comprises the subsidiary companies of Sonangol E.P. which are engaged in the procurement, storage, distribution and supply of refined crude oil and gas products, namely:

- Sonangol Logística; - Sonangol Distribuidora; - Sonangol Comercialização

Internacional.


12 13

Figure 2 Corporate Matrix of Sonangol, E.P.

ILLUSTRATIVE - COMPANIESPARTICIPATED BYSONANGOL E.P.IN THE PRIMARY CHAIN

PRIM

ARY

VALU

E CH

AIN

UPST

REAM

· M

IDST

REAM

· DO

WN

STRE

AM

EXPLORATION AND PRODUCTIONSONANGOL P&PSONANGOL HIDROCAC. INTL.SONANGÁS

REFINING AND TRANSPORTATIONSONANGOL SHIPPINGSONANGOL REFINAÇÃO

LOGISTICS AND DISTRIBUTION

SONANGOL LOGÍSTICASONANGOL DISTRIBUIDORASONANGOL COMERC. INTL.

· PUMA ENERGY· SONASING SAXI-BATUQUE· SONASING KUITO· LOBINAVE· ALM - ANGOLA LNG MARKETING· SONASING XIKOMBA· SONASING SANHA· SONASING MONDO· REFINARIA DO LOBITO· JASMIN (JOINT VENTURE)· ALNG S. SERVICES· ALNG SUPPLY LTD· SONANGOL SÃO TOMÉ OFFSHORE· SONANGOL STARFISH OIL & GAS· SONANGOL HIDROCARB. INTERNACIONAL· SONANGOL ASIA. SONANGOL USA COMPANY· SONANGOL CABO VERDE· SONANGOL LIMITED· SOMG· OPCO

ILLUSTRATIVE - COMPANIESPARTICIPATED BYSONANGOL E.P.IN THE PRIMARY CHAIN· SONASURF· ANGOFLEX· SONATIDE MARINE· TECHNIP ANGOLA· ESTALEIRO NAVAL DE PORTO AMBOIM· SONADIETS· SONAID· MOTA ENGIL ANGOLA· BCGA· UNITEL· BAI· ANGOLA CABLES· BIOCOM· MILLENNIUM BCP· BANCO ECONÓMICO· GENIUS· E.I.H· PDA· BAUXITE ANGOLA· SODIMO· KWANDA· SONAMEMT INDUSTRIAL· BAYVIEW

CORPORATEAND FINANCING

SONANGOL, E.P.SONANGOL FINANCE

NON-CORE ACTIVIITES

SONAIRMS TELCOMSONANGOL HOLDINGSIINDSONIPCLINICA GIRASSOLACADEMIA SONANGOLSONANGOL VIDA

Figure 1Sonangol, E.P. as an integrated oil and gas company

Crude Oil derivate products

Plataformas Ships Ships

Terminalsand Facilities

of storage

Tank Trucks

Pipelines

Cistern Wagons

Refinery

Sonangol

OtherOperators

Aviation

Navy

B2B

Lubricants

GPLSonangol Gás Natural

Sonangol Pesquisa E Produção

Sonangol Shipping

Sonangol Refinação

Sonangol Logística

Sonangol Distribuidora

Sonangol Distribuidora

Sonangol Gás Natural



Sonangol Finance Sonangol E.P.

Sonangol Hidrocarbonetos

Internacional

Corporate and Financing

Upstream Midstream Downstream

SonangolComercialização Internacional

Distribution

Secondary Logistics P rimary LogisticsExplorationand Production

Transportation and Storage LNG / Refinery Marketing and Supply

Trading

• In addition, Sonangol ope-rates in two other business segments, namely:

» Corporate & Financing: constituted by corporate cros-s-cutting functions, support and monitoring of Subsidiary companies and by obtai-ning funds in international markets.

- Sonangol E.P. and Sonan-gol Finance;

» Non-Core activities: constituted by the group of subsidiary companies whose main activity is to support the core business of Sonangol E.P., as well as companies that conduct business of a social nature and related to the development of human resources, or which priority is the support of the country’s economic development.

- Sonair, MS Telcom, So-

nangol Holdings, Sonangol

Investimentos Industriais (SIIND), Sonangol Imobiliá-ria e Propriedades (SONIP), Clínica Girassol, Academia Sonangol and Sonangol Vida.


14 15

2.2 CORPORATE BODIES

EXECUTIVE DIRECTORS

CARLOS SATURNINO

ROSÁRIO ISAACSEBASTIÃO MARTINS BALTAZAR MIGUEL

LOPO DO NASCIMENTO MARCOLINO MOCOANDRÉ LELO JOSÉ GIME

CHAIRMAN OF THE BOARD OF DIRECTORS

CARLOS PINTOLUÍS MARIAALICE SOPAS

NON-EXECUTIVE DIRECTORS


16 17

2.3 SONANGOL, E.P. BOARD OF DIRECTORS ALLOCATION / ROLE

CHAIRMAN OF THEBOARD OF DIRECTORSCARLOS SATURNINO

DIRECTORCARLOS PINTO

DIRECÇÃO DE SERVIÇOS JURÍDICOS (DSJ)TIAGO ALEXANDRE COSTA NETO

DIRECÇÃO DE RESPONSABILIDADE SOCIALCORPORATIVA (DRSC)

LURI DANILO EDUARDO DA COSTA

DIRECÇÃO DE TECNOLOGIA DE INFORMAÇÃO (DTI)

ALBERTO RIBEIRODIRECÇÃO DE PLANEAMENTO (DPL)

KID DOS SANTOS CARVALHODIRECÇÃO DE EXPLORAÇÃO (DEX)

DOMINGOS CUNHADIRECÇÃO DE FINANÇAS (DF)

DIVALDO PALHARES

DIRECÇÃO DE GESTÃO DE RISCOS (DGR)ALBERTO CARDOSO PEREIRA

FUNDO DE PENSÕES (FP)ALBERTO CARDOSO PEREIRA

CLINICA GIRASSOLJOAQUIM VAN-DÚNEM

PETRO ATLÉTICOTOMÁS FARIA

DIRECÇÃO DE ADMINISTRAÇÃOE INFRAESTRUTURAS (DAI)

FUNDO DE ABANDONO (FA)

DIRECÇÃO DE NEGOCIAÇÕES (DNEG)SUZEL CARDOSO ALVES

DIRECÇÃO DE PRODUÇÃO (DPRO)BELARMINO CHITANGUELECA

DIRECÇÃO DE ECONOMIA DAS CONCESSÕES (DEC)

NATACHA MASSANO

DIRECÇÃO DO COMITÉ DE CONTROLODAS CONCESSÕES (DCCC)

PEDRO MANUEL ALEXANDRE

DIRECÇÃO LABORATÓRIO CENTRAL (DLAB) ANTÓNIO AUGUSTO MORAIS GARCIA

GABINETE DE ARQUIVOE GESTÃO DE DADOS (GAD)

ISABEL POLICARPIO DA SILVA

SONANGOL HIDROCARBONETOINTERNACIONAL

FREDERICO FERRAZ DOMINGOS

EMPRESA DE SERVIÇOS E SONDAGENSDE ANGOLA, LDA (ESSA) FERNANDO DA FONSECA

DIRECÇÃO DE GESTÃO DE PROJECTOSESTRUTURANTES (DGPE)

JOAQUIM SOARES KITECULO

DIRECÇÃO DE PROJECTOS (DP)DANIELA MATOS

DIRECÇÃO DE SISTEMASDE INFORMAÇÃO (DSI)

ANDRÉ PITRA

DIRECÇÃO CENTRAL LOGÍSTICA (DCL)NELSON CARVALHO (INTERINO)

SONANGOL IMOBILIÁRIA E PROPRIEDADE, LDA (SONIP)

AMILTON CUNHA

SONANGOL INTEGRATED LOGISTIC SERVICE (SONILS)HELDER SOUSA

DIRECÇÃO DE QUALIDADESEGURANÇA E AMBIENTE (DQSA)

MÓNICA ROQUE

DIRECÇÃO DE SEGURANÇAEMPRESARIAL (DSE)

MANUEL DA SILVA

SONANGOL DISTRIBUIDORA, SABERNARDO VIEIRA ANTÓNIO (INTERINO)

SONANGOL LOGÍSTICALUÍS MARIA

SONANGOL GÁS NATURAL, LDA(SONAGÁS)

MAURO GRAÇA

LUXERVIZA, LDA(GERAÇÃO DE ENERGIA ELÉCTRICA)

JOÃO DA SILVA

NÚCLEO DE PETROQUÍMICA

DIRECÇÃO DE COMUNICAÇÃO E IMAGEM (DCI)MATEUS BENZA

COMITÉ DE COORDENAÇÃO DO PROJECTOSSOCIAS NO SOYO (CCPSS)

HELDER JOAQUIM DOS SANTOS

MSTelcom, Lda(MERCURY)

ROGER DOS SANTOS FERREIRA

CENTRO RECREATIVO PAZ FLORADALBERTO SENA

SONANGOL VIDAALBERTO CARDOSO PEREIRA

SONANGOL INVESTIMENTO INDUSTRIAIS (SIIND)

EUGÉNIO BRAVO DA ROSA

DIRECÇÃO DE AUDITORIA E CONTROLOINTERNO (DACI)

NELSON EFENGUE BERNARDO

GABINETE DE RELAÇÕES COM O ESTADO E FISCALIDADE (GEF)

VANESSA GODINHO

DIRECÇÃO DE ÉTICA (DE)OLÍMPIA GRAÇA MAGALHÃES

ACADEMIA SONANGOL, SABALTAZAR MIGUEL

CENTRO DE APOIO EMPRESARIAL (CAE)JOB CONTREIRAS VASCONCELOS

QUICOMBO SUPORTE LOGÍSTICO

SONANGOL SHIPPING ANGOLA(LUANDA)

GABINETE DO PRESIDENTE DO CONSELHO DE ADMINISTRAÇÃO (GPCA)

JANUÁRIO VICENTE

SONANGOL COMERCIALIZAÇÃOINTERNACIONAL (SONACI)

LUÍS PEDRO MANUEL

SONANGOL HOLDINGS, LDAJOSINA BAIÃO MAGALHÃES

SONANGOL SERVIÇO AÉREO, S.A(SonAir)

FILOMENO MERLATH (INTERINO)

SONANGOL REFINAÇÃO, SA(SONAREF)

SONANGOL FINANCE

SECRETARIADO DO CONSELHODE ADMINISTRAÇÃO (SCA)

JULIÃO BARBER

SONANGOL PESQUISA E PRODUÇÃO, SA(SNL, P&P)

RICARDO VAN-DESTE (INTERINO)

CHINA SONANGOL INTERNACIONALMAURO PIZARRO (INTERINO)

DIRECÇÃO DE RECURSOSHUMANOS (DRH)

MARIA DO ROSÁRIO VIEGAS

DIRECTORLUÍS MARIA

DIRECTORSEBASTIÃO MARTINS

DIRECTORALICE SOPAS

DIRECTORBALTAZAR MIGUEL

DIRECTORROSÁRIO ISAAC

DIRECTORMARCOLINO MOCO

DIRECTORLOPO DO NASCIMENTO

DIRECTORJOSÉ GIME

DIRECTORANDRÉ LELO

NON-EXECUTIVE DIRECTORS


PERFORMANCE SUMMARY03


20 21

PERFORMANCE SUMMARY

3.1 EXECUTIVE SUMMARY

03

This report presents the per-formance of Sonangol, E.P. and its subsidiaries during 2017, highlighting the results achieved in the several planned activities.

During 2017, the exploration activity in Angola resulted in the completion of 8 seismic processing programs, totalling 13,766 Km2 of 3D seismic, and in the drilling of seventy-four (74) development wells, of which fifty-three (53) producers and twenty-one (21) injectors (work over pits).

During 2017, 595,810,124 bar-rels of crude oil were produced, corresponding to a daily average of 1,632,357 barrels, a 5% de-crease when compared to 2016.

From the volume reached, Sonangol received 216,825,582; 134,307,947 (62%) in the form of Concessionaire’s rights and 82,517,635 (38%), relating to Sonangol Investidora.

Angola’s gas production amoun-ted to 5,822,681 metric tons, from which 1,227,193 of LPG, 4,371,017 of LNG and 224,471 of Condensates. From this produc-tion, a total of 1,421,195 metric tons was assigned to Sonangol, a 185% increase when compa-red with the previous year, due to the good performance of the

Angola LNG plant. From January to December 2017, an average of 52,159 barrels per day of Crude Oil was processed by Refinaria de Luanda (Luanda’s refinery), corresponding to an 80% utiliza-tion rate of the installed capaci-ty. The total refined production amounted to 2,473,434 metric tons (including LPG), 3% below the production achieved in the previous year.

In the period under review, Sonangol transported a total of 14,940,021 metric tons of products, from which 9,788,210 metric tons of crude oil and 5,151,811 metric tons of refined products. The quantities trans-ported during 2017 represented a 7% increase when compared to 2016.

There were 5,106,682 metric tons of Refined Products marke-ted, from which 3,638,761 were in the domestic market and 1,467,920 in the foreign market (including butane and propane), corresponding to a 9% decrease in the total volume of marketed products when compared to 2016.

To meet domestic needs, appro-ximately 3,267,227 metric tons of refined products were pur-chased from the foreign market,

while imports decreased appro-ximately 7% when compared to 2016.

198,301,082 barrels of crude oil were sold in the foreign market, 3% less than in 2016, with the average price of Angolan oil reaching USD 54.06/Bbl.

3.2 OPERATING PERFORMANCE – EBITDA

Consolidated EBITDA amounted to AOA 625,270 million, a 19% increase mainly driven by the upstream performance, where the increase in the price of crude oil was the most relevant factor, and by downstream performance. These two segments represented, respectively, 87% and 24% of the total 2017 EBITDA.

EBITDA in the Corporate and Financing segment in the fiscal year of 2017 was negative in the amount of AOA 98,630 million, sin-ce this business segment aggre-gates several support activities of other segments.

The upstream segment (Explora-tion and Production) represents approximately 87% of the EBITDA recorded in the year and had a positive variation of 106% when compared to 2016, due to the in-crease in the average selling price of the Angolan oil.

The total production had a positive year-on-year change of 5%, resul-ting in an average daily production of 245 thousand Bbls. Regarding

0

-100.000

100.000

200.000

300.000

400.000

500.000

600.000

700.000

-98.630Corporate

& FinancingUpstream Midstream Downstream Non Core Ajustamentos

ConsolidaçãoTotal

541.11741.207

148.332

-9.834

3.078 625.270

Graphic 1EBITDA by business segment (AOA million)

gas production, Sonangol recorded a 35% increase in LPG production, which increased from 277 thou-sand metric tons to 373 thousand metric tons.

In 2017, the EBITDA attributed to the Midstream segment (Refining and Transportation) represented 7% of Sonangol’s total EBITDA. In this year, Refinaria de Luanda acquired 18,579,108 metric tons of Crude Oil, with an 80% utiliza-tion of the installed capacity and a decrease of 1.5% compared to the previous year.

With a lower availability of crude oil, an average of 52,159 barrels of Crude Oil per day was processed, representing a negative variation of 3% when compared to 2016. The production of refined products reached 2,473,434 metric tons, representing a negative variation of 3% when compared to the pre-vious year.

Regarding the transport of crude oil, there was a 17% increase in the quantities transported. Howe-ver, the transport of oil derivatives

registered an 8% decrease, due to the macroeconomic context and the economic slowdown.

EBITDA registered in the Downs-tream segment (Logistics and Distribution) amounted to AOA 148 billion, representing 24% of the total for the year and a decrease of 37% compared to the previous year, mainly due to the decrease in the consumption of oil derivatives.

Procurement and storage acti-vities decreased 10% and 22%, respectively, due to the retraction in the consumption of oil derivati-ves. At internal level, the supply of refined products also registered a decrease of 15%, which is explai-ned by the contraction of demand, as a result of the national econo-mic situation.

EBITDA attributed to Non-nuclear Business in 2017 was negative, in the amount of AOA 9.8 billion, representing a decrease in the amount of AOA 11.2 billion when compared to 2016. The indica-tor was strongly affected by the decrease in the number of flight hours by Sonair, the decrease of voice traffic in MS Telcom and the decrease in the activity of Clínica Girassol.


22 23

3.3 OPERATING PERFORMANCE – NET INCOME

3.4 INVESTMENTS

Corporate & Financing

Upstream Midstream Downstream Non Core AdjustmentsConsolidation

Total

23.607

8.705

-35.130

29.335

-2.230

3.078 27.365

Graphic 2Net income by business segment (AOA million)

-10.000

-5.000

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

In 2017, consolidated net income amounted to AOA 27,365 million, a 106% increase compared to 2016. The Downstream activity and the Corporate and Financing segment (which incorporates approximately AOA 155,356 million of financial results) contributed significantly for this result.

Despite the recovery in the price of crude oil in the international market over the last months, the investment activity was very conservative. Priority was given to the exploration and production of crude oil and natural gas, aiming to increase the volume of produc-tion and compensate the sharp decrease of fields.

From the amount of USD 1,674,176,000 invested during 2017, 90.6% were in the Explora-tion and Production segment, with investments in the FPSO Kaombo North and South development projects, in Block 32, with the be-ginning of the production expected scheduled for 2018, and in the Ochigufu and Vandumbu develop-

ment projects, at the West Hub of Block 15/06, with the beginning of the production also scheduled for 2018. Sonangol Pesquisa e Produ-ção holds a 30% and 36.84% stake in these Blocks, respectively.

A share of 9.2% (AOA 154 million) of the total investment was allocated to the Refining and Transportation segment, with the completion of the manufacture of two suezmax ships, for feet repla-cement.

The remaining 0.2% correspond to smaller investments in the Non--Nuclear Business segment.

Table 12017 Investment Program of Sonangol E.P

M.U.: USD thousand

NameExecution

Variance1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Execution

Corporate and Financing - - - - - n.aSonangol, E.P. - - - - - n.a

Exploration and Production 451.300 429.287 307.908 327.700 1.516.195 -46%Sonangol, E.P. - Bloco 0 28.414 114.849 31.154 62.973 237.390 -43%

Sonangol Pesquisa e Produção 421.175 311.989 274.231 262.848 1.270.243 -46%

Sonangol Hidrocarbonetos Interna-cionais 426 1.342 1.512 1.031 4.311 n.a

Songás - n.a

ESSA (Perfuração) 1.285 1.107 1.011 848 4.252 -68%

Exploration and Production 56.619 97.516 - - 154.135 26%Sonangol Shipping 56.619 97.516 - - 154.135 n.a

Sonangol Refinação - - - - - n.a

Sonarel - - - - - n.a

Sonaref - - - - - n.a

Logistics & Distribution - - - - - n.aSonangol Logística - - - - - n.a

Sonangol Distribuidora - - - - - n.a

Non-Nuclear Business 2.829 471 444 103 3.846 12%Sonair - - - - - n.a

Sonangol MSTelcom - - - - - n.a

Sonangol Holdings - - - - - n.a

Sonangol Investimentos Industriais (SIIND) - - - - - n.a

Sonangol Imobiliária e Propriedades (SONIP) 2.829 471 444 103 3.846 37%

Clínica Girassol - n.a

Academia Sonangol - - - - - n.a

Total 510.747 527.274 308.352 327.803 1.674.176 -43%

Graphic 3Investments execution by segment

0,0%

0,0%

0,2%

9,2%

90,6%

0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% 90,0% 100,0%

Corporateand Financial

Logisticsand Distribution

Businessnon-nuclear

Refining andTransportation

Exploration and production


PERFORMANCE BYBUSINESS SECTOR

04


26 27

PERFORMANCE BYBUSINESS SECTOR

4.1 CONCESSIONAIRE

04

The slowdown in exploration activity in the global oil sector was reflected in the Concessionaire’s activity during 2017. Thus, no oil block biddings were carried out, there were no seismic activity (acquisition) and no new explo-ration and appraisal wells were drilled. As a result of the lack of investment in exploration, no new resources were discovered.

In order to reverse the downward trend in production, the Conces-sionaire has developed key projec-ts – Polo Este (Block 15/06), CLOV Phase 1 (Block 17) and Kaombo (Block 32) – with the beginning of production scheduled for 2018 and with an estimated production of approximately 1,000 Mbbl.

The beginning of production of the Cabaça Sudeste Field in Block 15/06, with two wells, has atte-nuated the decrease in produc-tion. Thus, in 2017, the volume of crude oil production decreased 5% when compared to 2016, while Concessionaires’ Rights registered a decrease of 6%. Regarding the production of Associated Natural Gas, production decreased 8% compared to 2016. In turn, LPG production registered a substan-tial increase, 68% in relation to the previous year, justified by the good performance of Angola LNG factory.

As a National Concessionaire, Crude Oil exports corresponded to 89% of the collected rights, a 6%

decrease compared to the pre-vious year, contributing negatively to the total exports registered by the group (Sonangol E.P. and So-nangol Pesquisa e Produção).

In 2017, Sonangol was able to recover USD 167 billion from the total of USD 223 billion of reco-verable costs in the concessions in production. Of the total costs recovered, more than 63% resul-ted from Blocks 17 and 15, respec-tively representing 38% and 25%.

4.1.1 EXPLORATION4.1.1.1 SEISMIC ACQUISITION

4.1.1.2 SEISMIC PROCESSING

During the period under review there was no seismic activity due to its postpone-ment and/or cancellation in order to assess the operational efficiency of crude oil exploration projects.

Table 2Exploration activity [Seismic Acquisition]

Table 3 Seismic Processing Completed

Seismic Acquisition2D Seismic 3D Seismic 4D Seismic

(Km) (Km2) (Km3)2017 2016 2017 2016 2017 2016

Block 15/06 (3D-15/06NW-PGS) - - - 992 -

FS/FST (CGG2016) - - - 60 -

Total - - - 1.052 -

Seismic Block Programme Beginning Conclusion Extension

3D

0 3D-0 Area A Erva/Bucomazi Study 4th Quarter/2016 1st Quarter/2017 350 Km2

02/153D OBC GAROUPA PSTM 2nd Quarter/2016 2nd Quarter/2017 600 km2

3D OBC GAROUPA PSDM 3rd Quarter/2016 2nd Quarter/2017 600 km2

15/06 3D-15/06-PSTM-NW -PGS-2016 2nd Quarter/2016 1st Quarter/2017 1.032 km2

32

3D-32B22N&B10N 4th Quarter/2013 1st Quarter/2017 1.100 km2

3D-32PSDM13SW ÁreaC22 2nd Quarter/2015 1st Quarter/2017 600 km2

3D-32 Bi-WATS CNE PSDM 3rd Quarter/2014 3rd Quarter/2017 1.484 km2

Multi-Customer 3D-MC WG99 Phase VII/VIII 2nd Quarter/2015 1st Quarter/2017 8000 km2

Total 3D 13.766 Km2

At the end of 2017, eight (8) seismic processing programs were concluded, totalling 13,766 Km² of 3D seismic.


28 29

Between January and December 2017, sixteen (16) seismic processing programs were in progress as descri-bed in the table below:

Table 4 Seismic Processing in Progress

Sísmica Bloco Programme Beginning Progress Extension

2D 32 2D-MCWGAngolaUDA PSD 4th Quarter/2016 97% 3.740 Km

Total 2D 3.740 Km

3D

0 3D-O-Area B Great 105-B Area 2nd Quarter/2017 85% 586 km2

143D-14 Greater Tomb-Land VM e well calibration 3rd Quarter/2017 95% 1660 km2

3D-14 Greater Land AVO and Pre-stack Inversion 3rd Quarter/2017 60% 471 km2

15/06

3D-15/06 PGS 16 PSDM 1st Quarter/2017 99% 1.032 km2

3D-15/06PSDM Revision Omocola North Area 1st Quarter/2017 99% 550 km2

3D-15/06 PSG16 AVO Analysis 1st Quarter/2017 45% 1.032 km2

3D-15/06 PSG16 Lower Miocene Oligocene PSDM 1st Quarter/2017 98% 1.000 km2

32

3D-32LO2007 C12SW PSDM 3rd Quarter/2015 99% 520 km2

3D-32HDGIC2006 PSDM 2nd Quarter/2016 99% 520 km2

3D-32 Colorau South dedicated imaging 4th Quarter/2016 99% 590 km2

3D-32 Louro RTM Remigration-Phase 2 1st Quarter/2017 85% 590 km2

3D-32 Louro RTM Remigration-Phase 1 4th Quarter/2017 99% 590 km2

Mostarda VMB & imaging 4th Quarter/2017 8% 826 km2

Caril 3D/4D Pre-Processing 2nd Quarter/2017 99% 211 km2

Total 3D 10.178 Km2

4D 17 4D CLOV-Baseline & Monitor 1 Full Processing 2nd Quarter/2017 67% 729 km2

Total 4D 729 Km2

4.1.1.3 SURVEY-EXPLORATION, EVALUATION AND DEVELOPMENT ACTIVITY

Table 5 Exploration Wells

Blocks / Association Research Well Evaluation Well Wells Develop. Product

Wells Develop. Injector

Block 0 - Cabinda Association - - 13 3

Block 17 - - 5 4

Block 15/06 - - 5 1

Block 17 - - 12 6

Block 31 - - - 2

Block 32 - - 11 5

Congo Onshore - - 7 -

Total - - 53 21

4.1.1.4 DEVELOPMENT PROJECTS

Table 6 Development Projects

Project Block Beginning of Production

Current Progress (%) Status as at December 2017

Polo Oeste, Ochigufu

15

1T 2018 83 The commissioning of submarine equipment is in progress.

Polo Oeste, Vandunbu 4T 2018 90 Preparing for the manufacture of UG8A and UG9A umbilicals.

Polo Oeste, SMBS 4T 2018 73 The last unit is being produced.

CLOV fase 1 17 2T 2018 93 The well jumpers manufacturing and installation campaign is ongoing.

Kaombo 32 4T 2018 91 Delays in FPSO delivery were recorded. Production expected to start in July 2018.

In 2017, seventy-four (74) deve-lopment wells were concluded: fifty-three (53) producing wells and twenty-one (21) injecting wells – Service Wells.

The development drilling opera-tions were concentrated in Block 17, where twelve (12) producing wells and six (6) injecting wells were concluded in Block 0, where thirteen (13) producing wells and three (3) injecting wells were con-cluded; in Block 32, where eleven (11) producing wells and five (5) injecting wells were concluded; in Block 15, where five (5) produ-cing wells and four (4) injecting wells were concluded; in Onshore Congo, where seven (7) producing wells were finalized; in Block

15/06, where five (5) producing wells and one (1) injecting well were concluded; and, finally, in Block 31, where two (2) injecting wells were concluded.

On the other hand, workover operations were concentrated in Cabinda Concession; in Block O, with twenty-six (26) wells; in Blo-ck 14, with twenty-one (21) wells; in Soyo Onshore, with nineteen (19) wells; in Blocks 15 and 17, with two (2) wells each; and in Block 32, with one (1) well.

In order to support the crude oil production targets, the projects listed above have been developed. For each project, we provide the status as at 31 December 2017.


30 31

4.1.2 CRUDE OIL & GAS PRODUCTION 4.1.2.1 CRUDE OIL PRODUCTION

During 2017, 595,810,124 barrels of crude oil were produced in An-gola, equivalent to a daily average of 1,632,357 barrels. Compared to the same period of the previous year, production volume decrea-sed by 5%.

This situation is mainly explained by the operational constraints on the blocks in production, the decrease in activity due to the lack of approval of hiring probes and other contracts, as well as

Table 7 Crude oil production in Angola

U.M.: Bbls

Concessions & BlocksExecution

Variance1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Production

Offshore 146.712.028 148.015.480 152.872.144 145.394.172 592.993.824 -5%Block 0 19.373.790 23.261.392 23.832.727 23.054.616 89.522.525 4%

Area A 12.818.976 16.047.557 17.032.180 16.349.597 62.248.310 13%

Area B 6.554.814 7.213.835 6.800.547 6.705.019 27.274.215 -11%

Block 2/05 78.427 75.707 75.017 100.006 329.157 -1%

Block 3/05 2.905.193 2.746.958 2.738.442 2.346.391 10.736.985 -21%

Block 3/05A 220.068 201.799 105.240 - 527.107 -47%

Block 4/05 586.508 609.385 554.246 484.084 2.234.223 -19%

Block 14 7.674.740 7.266.309 7.116.016 6.652.523 28.709.588 -18%

Block 14k 948.379 861.416 811.000 739.251 3.360.046 -27%

Block 15 26.247.570 25.857.392 25.969.527 24.287.327 102.361.816 -11%

Block 15/06 7.460.696 10.609.310 13.124.094 12.456.409 43.650.509 54%

Block 17 55.818.234 53.636.652 55.276.528 53.759.304 218.490.718 -5%

Block 18 10.744.995 10.838.328 10.299.179 9.308.454 41.190.956 -19%

Block 31 14.653.428 12.050.832 12.970.127 12.205.807 51.880.194 -13%

Onshore 724.494 697.456 696.834 679.516 2.816.300 -14%Cabinda Sul 85.161 95.884 116.232 126.584 423.861 -23%

Associação FS 20.482 18.501 21.647 20.760 81.390 -15%

Associação FST 618.851 583.071 558.955 550.172 2.311.049 -12%

Total 147.436.522 148.712.936 153.568.978 146.091.688 595.810.124 -5%Daily Average 1.638.184 1.634.208 1.669.228 1.587.953 1.632.357 -5%

the lack of sanctioning of new projects.

During this period, the Olomben-do Field started operations at Block 15/06, on 8 February, with a production of 12,868 barrels of oil. Girassol M14 project and FPSO Girassol from Block 17, also started operations on 5 June 2017, with a production of 1,800 barrels of oil from one single producing well.

By origin, Block 17 was the one that contributed most to produc-tion, followed by Blocks 15, 0, 31 and 18, representing an aggre-gate share of 84.7% of Angola’s crude oil production.

Table 8 Rights of crude oil production by companies

U.M.: Bbls

CompaniesExecution

Variance1st Quarter 2nd Quarter 3rd Quarter 3rd Quarter Production

Total 25.989.296 25.406.345 26.079.287 25.287.538 102.762.467 -5%BP 25.585.693 24.470.517 24.749.392 23.348.622 98.154.225 -11%

ESSO 21.662.675 21.070.287 21.443.116 20.466.792 84.642.870 -8%

Statiol 18.474.497 17.566.597 18.086.670 17.406.580 71.534.344 -7%

ENI 11.996.321 13.338.960 14.291.074 13.465.681 53.092.036 3%

Sonangol P&P 11.234.109 11.078.615 12.156.101 11.344.575 45.813.400 2%

Sonangol 10.036.606 11.579.364 11.970.328 11.503.730 45.090.028 3%

Chevron 10.267.693 11.638.060 11.799.804 11.328.859 45.034.417 -2%

SSI 9.534.167 10.019.159 10.549.370 9.763.625 39.866.321 -5%

Galp 776.081 731.495 713.431 665.260 2.886.267 -19%

Somoil 642.983 617.299 589.162 530.889 2.380.333 -18%

Ajoco 625.052 589.751 568.737 469.278 2.252.818 -23%

Acrep 119.774 123.723 113.298 103.266 460.061 -18%

INA-NAFTA 125.010 117.950 113.747 93.856 450.564 -23%

NAFTAGAS 125.010 117.950 113.747 93.856 450.564 -23%

Prodoil 83.117 85.637 78.658 73.011 320.423 -17%

Pluspetrol 46.839 52.736 63.928 69.621 233.124 -23%

China Sonangol 55.017 50.450 26.310 - 131.777 -96%

Force Petroleum 17.032 19.177 23.246 25.317 84.772 -23%

Falcon Oil 15.685 15.141 15.003 20.001 65.831 -1%

Kotoil, S.A 9.803 9.463 9.377 12.501 41.145 -1%

Poliedro Oil 9.803 9.463 9.377 12.501 41.145 -1%

Cupet 4.258 4.794 5.812 6.329 21.193 -23%

Total 147.436.522 148.712.936 153.568.978 146.091.688 595.810.124 -5%

0,01%0,1%0,1%0,1%0,4%0,4%

1,8%5,4%

6,9%7,3%

8,7%15,0%

17,2%36,7%

0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00% 35,00% 40,00%

Associação FS

Block 2/05

Cabinda Sul

Block 3/05A

Block 4/05

Associação FST

Block 3/05

Block 14

Block 18

Block 15/06

Block 31

Block 0

Block 15

Block 17

Graphic 4Crude oil production in Angola by block

The ownership of crude oil produced in Angola is shown below:


32 33

Table 9 Crude oil production by operator

U.M.: Bbls



Total 55.818.234 53.636.652 55.276.528 53.759.304 218.490.718 -5%Chevron 27.996.909 31.389.117 31.759.743 30.446.390 121.592.160 -3%

ESSO 26.247.570 25.857.392 25.969.527 24.287.327 102.361.816 -11%

BP 25.398.423 22.889.160 23.269.306 21.514.261 93.071.150 -16%

ENI 7.460.696 10.609.310 13.124.094 12.456.409 43.650.509 54%

SNL P&P 3.711.769 3.558.142 3.397.929 2.830.475 13.498.315 -22%

Somoil 717.760 677.279 655.619 670.938 2.721.596 -11%

Pluspetrol 85.161 95.884 116.232 126.584 423.861 -23%

Total 147.436.522 148.712.936 153.568.978 146.091.688 595.810.124 -5%Daily Average 1.638.184 1.634.208 1.669.228 1.587.953 1.632.357 -5%

By companies, foreign oil opera-tors in Angola produced 97.3% of the total volume of crude oil pro-duction during the period under review, led by TOTAL E&P Angola with 36.7% of total production, followed by CHEVRON with 20.4%, ESSO with 17.2%, BP with 15.6%,

ENI with 7.3% and Pluspetrol with 0.1%, The remaining 2.7% corres-pond to the production of national operators (Sonangol Pesquisa e Produção and Somoil), with 2.3% and 0.5%, respectively.

Graphic 5Crude oil production by operator

0,1%

0,5%

2,3%

7,3%

15,6%

17,2%

20,4%

36,7%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Pluspetrol

Somoil

SNL PP

ENI

BP

ESSO

Chevron

TOTAL

In terms of achieving the targets established by the operators of the concessions in production, there were technical and operational constraints, which are described below:

• Cabinda ConcessionIn this concession, the production was slightly below what was ex-pected due to the closure of some producing wells in Takula, Malongo and Mafumeira Sul reservoirs, caused by operational problems and by the monitoring and opti-mization works in Nemba, Ndola, Lomba and Bomboco reservoirs. Despite the above, production levels were supported by the entry into operation of thirteen (13) wells from Mafumeira Sul project and by the optimization of the Gas Oil Ratio (GOR) in Nemba and Sanha reservoirs.

• Cabinda SulProduction was above the forecas-ts, although it was slightly compro-mised in the 1st quarter due to the low pressure in the reservoir and the interventions in well Noz-1,

in order to remove the paraffin to create communication with the bottom of the well. In the following quarters, the reservoir production improved significantly, with the re-entry of well CA-04.

• FS/FST ConcessionIn this concession, production levels were below expectations due to the closure of some wells, na-mely sixty-two (62) producing wells and three (3) injecting wells, due to several operational problems such as oil leaks in in the three-inch line, malfunction in the instrumen-tation system and unavailability of the gas system.

• Block 2/05The reservoirs remain closed, except for the Essungo field, which went into operation with only two wells, in order to support the FS/FST production line. The well Es-trela-A, in Bagre field, was reope-ned in December 2017.

• Block 3/05The production has been affected by the loss of pressure of some

producing wells, the lack of water injection in all the reservoirs and the closure of some wells, due to the advanced stage of maturity of the reservoirs. It should be noted in this Block that, currently, there are ninety-three (93) wells closed: forty-eight (48) producing wells and forty-five (45) injecting wells.

• Block 3/05AThe downturn in production was due to the closure of the well, since 3 October, due to the accumulation of paraffins, thus, the well cleaning work is currently in progress.

• Block 4/05The production was slightly below expectations due to some operatio-nal problems and the low injection in some wells.

• Block 14The production was slightly below the expected. Despite the good performance of the reservoirs and the gas lift optimization works, there were some operational pro-blems in some wells and unplan-ned stoppages.


34 35

• Block 14KThere was a sharp decrease in production in Lianzi field, mainly due to the formation of “Scale”.

• Block 15In the first quarters, the production was compromised by the closu-re of some wells due to the high water and gas contents. In the 3rd quarter, the production was slightly higher than expected, due to the good performance of the Reser-voirs, with the entry into operation of well BAV-106 and the stabiliza-tion of the ALNG Plant.

• Block 15/06The production was above expecta-tions due to the good performance

of the Reservoirs, the beginning of operations of Cabaça Sudeste field, with two wells and the entry of injection well CSE-402, as well as the beginning of operations of Polo Este field.

• Block 17The production levels were slightly below expectations due to the good performance of the Reservoirs. These production levels were supported by the beginning of operations of Dália project, Phase 1A and 2, and Girassol M14.

• Block 18Production levels were compromi-sed due to the low pressure in re-servoirs, the closure of some wells

in order to optimize production and the decrease in water production. • Block 31The production levels were below expectations due to the low water injection in the reservoir, caused by several constraints in the injection water treatment system.

4.1.2.2 CRUDE OIL RIGHTS OF NATIONAL CONCESSIONAIRE

Table 10 Concessionaire’s crude oil rights

U.M.: Bbls

Concessions & Blocks

ExecutionVariance

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter CollectionsCabinda Onshore 7.407 7.792 9.265 10.013 34.480 -21%

Block 2/05 30.000 - 20.000 20.000 70.000 n.a

Block 3/05 1.633.064 870.689 711.571 857.053 4.072.377 -17%

Block 3/05A 60.000 50.000 - - 110.000 -4%

Block 4/05 - 81.321 - 79.800 161.121 -27%

Block 14 1.664.662 1.608.742 2.083.129 2.279.483 7.636.016 -12%

Block 14K 59.756 50.067 70.969 51.935 232.726 -19%

Block 15 9.252.460 7.416.370 10.482.994 7.834.591 34.986.415 -20%

Block 15/06 488.538 626.231 1.058.409 968.488 3.141.666 32%

Block 17 14.516.626 15.277.678 17.969.499 20.700.021 68.463.824 9%

Block 18 2.936.101 2.907.348 2.910.042 2.856.522 11.610.013 -18%

Block 31 1.124.916 962.665 939.399 762.332 3.789.312 -22%

Total 31.773.530 29.858.903 36.255.277 36.420.238 134.307.947 -6%Daily Average 349.160 328.120 394.079 395.872 367.967 -6%

A total of 134,307,947 barrels of crude oil, corresponding to a daily average of 367,967 Bbl, were obtained by the Concessionaire. The year was marked by a 6% decrease resulting, mainly, from the decrease in production, caused by the natural decline in Block 17 (Girassol, Jasmim, Rosa, Dália and Pazflor) and Block 15 (Kizomba A and B, Mondo, Saxi and Batuque) fields.

Gráfico 6Direitos de Petróleo Bruto da Concessionária por Bloco

0

10.000.000

20.000.000

30.000.000

40.000.000

50.000.000

60.000.000

70.000.000

Bloco 14 OutrosBloco 17 Bloco 18Bloco 15 Bloco 3/05 Bloco 31 Bloco 15/06

2017 2016

0

50.000

100.000

150.000

200.000

250.000

300.000

Bloco 2/05 Bloco 14K

Bloco 4/05CabindaOnshore

Bloco3/05 A

Regarding the rights collected by block, we continue to highlight Block 17 and 15, representing 77% of the total volume collected. Also, the higher collections were made in Dália, Girassol, Plutónio, Pazflor, Hungo and Mondo fields.


36 37

4.1.2.3 GAS PRODUCTION4.1.2.3.1 PRODUCTION OF ASSOCIATED NATURAL GAS

Table 11 Production of Associated Natural Gas

M.U.: Cubic feet (ft3)

BlocksExecution


Offshore 293.265 292.949 304.867 290.803 1.181.883 -9%Block 0 110.078 119.819 126.218 121.660 477.775 -1%

Area A 27.733 31.098 36.808 35.147 130.786 2%

Area B 82.345 88.721 89.410 86.513 346.989 -1%

Block 2/05 - - - - - n.a

Block 3/05 4.478 9.488 5.569 6.948 26.483 20%

Block 3/05A 167 227 145 - 539 -34%

Block 4/05 340 372 422 266 1.400 -7%

Block 14 8.879 8.184 6.561 6.773 30.397 -38%

Block 14k 1.038 911 780 606 3.335 38%

Block 15 52.836 53.017 54.315 54.220 214.388 -18%

Block 15/06 8.728 10.515 14.253 11.521 45.017 27%

Block 17 65.325 51.029 58.090 53.478 227.922 -12%

Block 18 23.589 24.855 22.100 22.661 93.205 -14%

Block 31 17.807 14.531 16.412 12.672 61.422 -11%

Onshore 998 1.805 1.873 1.689 6.365 13%Cabinda Sul 98 887 895 771 2.651 -3%

FS Concession 12 14 16 14 56 180%

FST Concession 888 904 962 904 3.658 27%

Total 294.263 294.754 306.740 292.492 1.188.248 -8%

During 2017, 1,188,248 cubic feet of gas were produced in Angola’s oil production concessions, corresponding to a decrease of 8% when compared to the previous year.

4.1.2.3.2 LPG PRODUCTION

Table 12 LPG production in Angola

M.U.: MT

OriginExecution


Sanha 80.169 82.648 100.323 90.149 353.289 -15%Butane 33.446 34.996 41.625 37.195 147.262 -14%

Propane 46.723 47.652 58.698 52.954 206.027 -16%

Cabinda Gas Plant 15.021 10.489 10.084 12.090 47.684 -32%Butane 6.884 4.954 4.403 5.363 21.604 -33%

Propane 8.137 5.535 5.681 6.727 26.080 -32%

Refinaria de Luanda 7.209 7.527 6.401 5.607 26.744 -2%ALNG 166.818 205.930 212.663 214.065 799.476 266%

Butane 69.899 83.397 83.690 84.540 321.526 242%

Propane 96.919 122.533 128.973 129.525 477.950 284%

Total 269.217 306.594 329.471 321.911 1.227.193 68%

When compared to 2016, LPG production increased 68%, the equivalent to 495,124 metric tons. This increa-se was mainly due to the good performance of Angola LNG factory.

Gráfico 7Direitos de Petróleo Bruto da Concessionária por Bloco

ALNG38%

Sanha29%

Cabinda Gas Plant

4%

Refinaria de Luanda

2%

ALNG was responsible for 65% of the production, followed by Sanha with 29%, Cabinda Gas Plant with 4% and Refinaria de Luanda with 2%.


38 39

4.1.2.3.3 LNG AND CONDENSATES PRODUCTION

Table 13 LNG production in Angola

Table 14 Condensate production in Angola

M.U.: MT

OriginExecução


Angola LNG 913.402 1.027.650 1.194.231 1.235.734 4.371.017 387%

Total 913.402 1.027.650 1.194.231 1.235.734 4.371.017 387%

M.U.: MT

OriginExecução


Angola LNG 43.679 55.391 62.003 63.398 224.471 199%

Total 43.679 55.391 62.003 63.398 224.471 199%

In the period under review, the production of Liquefied Natural Gas was 4,371,017 metric tons, 387% above the volume rea-ched in 2016. The production of Condensates was 224,471 metric

tons. When compared to 2016, there was an increase of 199%.

It should be noted that, in 2016, the Angola LNG factory resumed its production only in May, after

a long stoppage period, with an additional maintenance stoppage in August. In 2017 there was no stoppage with a relevant impact in production, thus explaining the increase in production.

During the period under review, the weighted average operating cost of the oil industry was USD 6.74/Bbl, excluding abandon-ment costs, registering a 12% decrease when compared to the previous year.

The highest levels of efficiency were recorded in Block 17 and 31, having presented the unit

4.1.3 ECONOMIC MANAGEMENT OF CONCESSIONS4.1.3.1 PRODUCTION COSTS

Table 15 Operation costs in production concessions

U.M.: USD/Bbl

BlocksProduction Costs

Variance2017 2016

Block 0 11,67 11,80 -1%

Block 2/05 31,37 15,22 106%

Block 3/05 14,71 17,84 -18%

Block 3/05A 13,93 6,78 105%

Block 4/05 28,78 33,00 -13%

Block 14 7,11 12,00 -41%

Block 14K 7,64 17,18 -56%

Block 15 5,69 4,42 29%

Block 15/06 11,27 10,43 8%

Block 17 3,85 6,36 -39%

Block 18 6,33 6,87 -8%

Block 31 4,82 4,73 2%

Cabinda Sul 16,11 12,38 30%

FS Concession 29,70 25,42 17%

FST Concession 27,94 21,59 29%

Industry Total 6,74 7,66 -12%

cost of USD 3.85/Bbl and USD 4.82/Bbl, respectively.

In contrast, lower efficiency le-vels were observed in Block 2/05 at a cost of USD 31.37/Bbl and in FS Associations and Block 4/05, at a cost of USD 29.70/Bbl and USD 28.78/Bbl, respectively.


40 41

4.1.4 CONCESSIONAIRE EXPORTS

Table 16 Exports Map of Sonangol Concessionaire

U.M.: Bbls

Exported BranchesExecutado

Variance1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Exported

QuantityDália 4.624.518 8.410.537 9.239.320 11.116.434 33.390.809 19%

Girassol 5.135.506 3.917.805 3.961.685 4.657.618 17.672.614 -14%

Paz Flor 3.756.048 1.947.787 2.765.414 3.671.129 12.140.378 44%

Mondo 2.777.320 2.762.183 2.706.385 2.866.678 11.112.566 7%

Hungo 3.623.917 1.842.596 4.667.001 - 10.133.514 -36%

Kissange 1.809.652 1.855.970 1.891.373 2.762.341 8.319.336 -17%

Nemba 1.724.418 1.589.827 1.941.458 2.312.328 7.568.031 -23%

CLOV 1.000.554 1.001.546 2.003.079 954.840 4.960.019 -2%

Saxi-Batuque 940.027 955.624 916.882 1.903.865 4.716.398 -28%

Saturno 1.124.916 962.974 939.399 762.332 3.789.621 -20%

Plutónio 980.257 - 949.911 - 1.930.168 -60%

Sangos 414.412 275.133 560.947 554.464 1.804.956 -20%

Olombendo 74.126 351.099 497.462 414.024 1.336.711 n.a

Gimboa - 81.321 - 79.800 161.121 -66%

Total 27.985.671 25.954.402 33.040.316 32.055.853 119.036.242 -6%

During 2017, the Concessionaire’s exports were 119,036,242 barrels of crude oil, corresponding to a 6% decrease when compared to the previous year.

Dália was the field with the grea-test weight in the volume of ex-ports, corresponding to 28% of the Concessionaire’s exports in the year. The beginning of operations of the Olombendo field, from Block 5/06, should also be highlighted, representing 1% of the exports.

4.1.4.1 RECOVERY OF INVESTMENTS MADE IN PRODUCTION CONCESSIONS

Table 17 Recovered Costs in Production Concessions

During the period under review, the recovered costs in produc-tion concessions, correspon-ding to development expenses, amounted to MUSD 167,495,597, representing a 9% increase in the recovery of costs when compared to 2016. This increa-se is mainly due to the rise of the oil price in the international market.

Regarding the costs to be re-covered, block 31 remains the asset with the largest volume, representing 25% of total costs to be recovered, due to the high cost of development of PSVM, which production started in the 4th quarter of 2012. block 31 is followed by block 17, with costs to be recovered representing approximately 24% of total costs, due to the investments in Pazflor project, which was completed

U.M.: MIL usd

Blocks Incurred Costs Recoveredcosts

Costs to be recovered

Block 2/05 1.920.700 21.182 1.899.518

Block 3/05 6.085.478 5.433.122 652.356

Block 3/05A 653.919 49.014 604.905

Block 4/05 2.617.095 2.375.557 241.538

Block 14 28.727.340 22.856.600 5.870.740

Block 15 45.421.397 41.139.812 4.281.585

Block 15/06 15.462.397 3.140.058 12.322.339

Block 17 77.379.280 63.842.993 13.536.287

Block 18 20.281.847 18.974.990 1.306.856

Block 31 23.450.001 9.557.551 13.892.450

COS 877.679 104.717 772.962

Total 222.877.135 167.495.597 55.381.538

in 2011, and more recently the CLOV project, completed in mid-2014.

The costs to be recovered re-garding Block 15/06 represent 22% of the total of costs to be recovered. It should be noted that, since the beginning of production in 2014, only 20% of the recoverable costs have been recovered due to, on one hand, the high development costs and, on the other hand, the fact that production started when the oil price in the market began to decline progressively until the end of 2017.

In block 15, the reported cos-ts are related to development expenses in Kizomba Satellite Phase 2, which came on stream in June 2015.


42 43

4.2 PRIMARY VALUE CHAIN – UPSTREAM SEGMENT

4.2.1 PRODUCTION OF CRUDE OIL OF SONANGOL INVESTIDORA

The Exploration and Production activity is a critical segment of Sonangol’s activity, which is reflected in the Company’s own investment strategy, with this segment representing 90,6% of the total investment made in 2017, as mentioned in 2.4.

In 2017, Angola produced a total of 595,810,124 barrels of Crude Oil, of which 82,517,635 are re-lated to Sonangol, representing a 3% increase over the same

period last year. This increase is due to the increase in pro-duction of Sonangol Pesquisa e Produção in Block 15/06 (54% increase) and from the increase in production of Sonangol E.P. in Block 0, Area A (increase of 13%).

Regarding the production of LPG, the increase of the ALNG plant production, where Sonan-gol has a 22.8% share, reflected positively in the increase of pro-

duction of 35% and in the reduc-tion of imports in 98% compared to the previous year.

In 2017,the Upstream pri-mary chain recorded sales and EBITDA in the amount of AOA 2,130,340 million and AOA 541,117 million, respectively, the equivalent to 87% of the Com-pany’s total EBITDA.

Table 18 Crude Oil Production of Sonangol Investidora

U.M.: Bbls



SNL E.P 7.943.254 9.537.171 9.771.418 9.452.393 36.704.235 4%Block 0 7.943.254 9.537.171 9.771.418 9.452.393 36.704.235 4%

Área A 5.255.780 6.579.498 6.983.194 6.703.335 25.521.807 13%

Área B 2.687.474 2.957.672 2.788.224 2.749.058 11.182.428 -11%

SNL P&P 11.234.109 11.078.615 12.156.101 11.344.575 45.813.400 2%Operated Blocks 1.260.746 1.215.961 1.167.311 985.256 4.629.273 -6%Block 3/05 944.188 892.762 889.994 762.577 3.489.520 1%

Block 3/05A 46.765 42.882 22.364 - 112.010 -46%

Block 4/05 269.794 280.317 254.953 222.679 1.027.743 -19%

Non-operated Blocks 9.973.363 9.862.654 10.988.791 10.359.319 41.184.127 3%Cabinda Sul 21.294 22.410 26.638 28.788 99.130 -20%

FS/FST Concession 31.967 30.079 29.031 28.547 119.624 -12%

Block 14 1.198.846 1.098.068 997.090 919.958 4.213.962 -16%

Block 14K 178.296 161.946 152.467 138.979 631.688 -26%

Block 15/06 2.542.381 3.615.334 4.472.298 4.244.770 14.874.783 54%

Block 31 6.000.579 4.934.817 5.311.267 4.998.278 21.244.940 -13%

Total 19.177.363 20.615.785 21.927.519 20.796.968 82.517.635 3%Daily Average 213.082 226.547 238.343 226.054 226.076 3%

During 2017, there was a 3% increase in the production of crude oil of Sonangol Investido-ra when compared to the same period in 2016.

The 4% increase in Sonangol EP’s share in Block 0 was due to the increase in the production

Of the total LPG Production, 373,423 metric tons were produced by Sonangol, of which 49% came from Angola LNG, 39% from Sanha and the remaining 12%

M.U.: MT

OriginProduced Quantity


Sanha (41%) 32.869 33.886 41.132 36.961 144.848 -15%Butane 13.713 14.348 17.066 15.250 60.377 -14%

Propane 19.156 19.537 24.066 21.711 84.471 -16%

Cabinda Gas Plant (41%) 6.159 4.300 4.134 4.957 19.550 -32%Butane 2.822 2.031 1.805 2.199 8.858 -33%

Propane 3.336 2.269 2.329 2.758 10.693 -32%

Refinaria de Luanda (100%) 7.209 7.527 6.401 5.607 26.744 -2%ALNG (22,8%) 38.035 46.952 48.487 48.807 182.281 266%Butane 15.937 19.015 19.081 19.275 73.308 242%

Propane 22.098 27.938 29.406 29.532 108.973 284%

Total 84.271 92.665 100.155 96.332 373.423 35%

4.2.2 GAS PRODUCTION OF SONANGOL E.P.4.2.2.1 LPG PRODUCTION

Table 19 Sonangol’s Share in LPG Production

from Refinaria de Luanda and the Cabinda Gas Plant, 7% and 5% respectively. Compared to 2016, Sonangol registered a 35% increase in LPG production.

of Area A, following the be-ginning of operations of thirteen (13) wells from Mafumeira Sul project.

Regarding Sonangol Pesquisa e Produção, there was an incre-ment of 2%, mainly due to the increase in production in Block

15/06, a non-operated block where Sonangol participates as an investor, where two wells came on stream, in the Cabaça Sudeste field.


44 45

4.2.2.2 LNG PRODUCTION AND CONDENSATES

Table 20 Sonangol’s Share in LNG Production

Table 21 Sonangol’s Share in Condensate Production

M.U.: MT

OriginExecution


Angola LNG 208.256 234.304 272.285 281.747 996.592 387%

Total 208.256 234.304 272.285 281.747 996.592 387%

M.U.: MT

SourceExecution


Angola LNG 9.959 12.629 14.137 14.455 51.179 199%

Total 9.959 12.629 14.137 14.455 51.179 199%

4.3 PRIMARY VALUE CHAIN – MIDSTREAM SEGMENT

4.3.1 REFINING BUSINESS

The Refining and Transportation segment recorded sales equivalent to AOA 208,776 million in 2017 and an EBITDA of AOA 41,207 million, corresponding to 7% of Sonangol’s total EBITDA. Regarding the activity of Refi-naria de Luanda, there was a decrease in raw material supply of 7% and, consequently, a decrease in the use of the installed refining capacity of 3% in relation to the same period of the previous year. This negative perfor-mance was proportionally reflected in the decrease of the volume of crude oil processed and the volume of refined products produced (3%).

Regarding the Refining business, Sonangol maintains Refinaria de Luanda with a nominal installed capacity of 65,000 Bbl/d. The average utilization rate of installed capacity, in 2017, was of 80%. The decrease was due to the 7% reduction in the supply of raw materials, as a result of the reduction in the supply from the Plutónio and Palanca fields, of 4% and 11%, respectively.

During 2017, Sonangol’s LNG production amounted to 996,592 metric tons and the production of Con-densates reached 51,179 metric tons. Both productions took place in the Angola LNG plant.

Table 22 Average Utilization Rate of Installed Capacity

Table 23 Volume of crude oil processed

Table 24 Refined production

Crude Oil ProcessingExecução

Variance1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Processing

Instaled Capacity Utilisation Rate (BOPD) 85% 84% 77% 75% 80% -3%

U.M.: Bbls

BranchesExecução

Variance1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Processing

Palanca 2.665.106 1.996.352 2.183.772 1.431.414 8.276.644 -11%

Nemba - - 119.947 180.956 300.903 201%

Plutónio 2.237.569 2.767.310 2.147.578 2.562.479 9.714.936 -4%

Hungo 75.440 188.079 148.086 334.069 745.674 388%

Total 4.978.115 4.951.741 4.599.383 4.508.918 19.038.157 -3%

Daily crude oil processed 55.312 54.415 49.993 49.010 52.159

M.U.: MT

ProductExecution


LPG 7.898 7.527 6.401 5.390 27.216 0%

Nafta 67.077 66.147 64.423 80.064 277.711 -9%

Gasoline 16.440 11.691 6.518 - 34.649 5%

Jet B 17.860 11.899 20.638 20.634 71.031 -9%

Jet A1 75.278 60.385 70.813 72.170 278.646 7%

Kerosene 17.325 24.233 6.508 3.885 51.951 -39%

Diesel 158.882 164.962 140.108 142.988 606.940 1%

Ordoil 57.918 13.525 33.039 56.988 161.470 -19%

Fuel Oil 224.457 274.678 243.250 205.075 947.460 -2%

Asphalto 2.122 5.509 2.506 6.162 16.299 395%

Cutback 20 41 - - 61 -94%

Total 645.277 640.597 594.204 593.356 2.473.434 -3%

The average utilization rate of installed capacity was of 80%, 3% below the rate recorded in 2016.

In 2017, Refinaria de Luanda acquired 18,579,108 barrels of crude oil distributed by Plutónio (52%), Palanca (42%), Hungo (4%) and Nemba (2%).

This allowed 19,038,157 barrels of crude oil to be processed, corresponding to a daily average of 52,159 bar-rels, i.e., a total production of 2,473,434 MT of refined products.


46 47

In 201 7, refined production re-gistered a decrease of 3% when compared to 201 6, mainly due to the following situations:

• Malfunction of critical equipment, due to 7 years of intensive use, which increases the need to perform the Gene-ral Stop (the last general stop occurred in 201 0);

• Power cuts due to the stoppage of the GT35 turbine;

• Cancellations or delays in shipments of crude oil, espe-cially from Plutónio;

• Failure to comply with the Fuel Oil withdrawal plans by the Katyavala ship and the cement production compa-nies, threatening the exports programs;

• Lack of spare parts to repair equipment (more than 3 years without stock replenishment in the warehouse);

• Delays in the replenishing of chemical stocks, resulting from delays in payments to suppliers;

• Excessive bureaucracy in procurement processes and, consequently, in payments to suppliers.

The production of Gasoline was interrupted in September, due to the inefficiency of the U700 Ca-talyst (end of another lifecycle), thus, the regeneration process was initiated.

Considering the time of existen-ce of the current catalyst and the successive processes of regene-ration that it has endured, new catalysts have been acquired for replacement purposes. LPG extraction has declined in the last 3 years as a result of the crude oil mix being processed, as the Refinery started to use mainly the Plutonio field, resul-ting in a level of LPG extraction of only 1 .06% of the total crude oil processed. This situation ini-tiated the production of Asphalt with 50/70 penetration, thus responding to the specification of the product that the market demanded. In this way, Asphalt production increased 4 times more when compared with the previous year.

Graphic 8Production profile of refined products

Fuel Oil38%

Kerosene2%

Diesel25%

Cutback0%

Gasoline1%

LPG1%

Ordoil7%

Asphalt1%

Jet A111% Jet B

3%

Nafta11%

When compared to 201 6, there was a 1 7% increase in the quantity of crude oil transported. This segment represented 9.2% of the total investment made in 201 7, the second largest after the Exploration and Produc-tion segment..

M.U.: MT

FleetExecution

Variance1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Transported

quantitiesFleet SUEZMAX 1.716.922 1.886.172 1.658.055 1.973.202 7.234.351 30%Crude Oil 1.716.922 1.886.172 1.658.055 1.973.202 7.234.351 30%

Fleet CABOTAGEM 625.177 568.445 828.842 531.395 2.553.859 -8%Crude Oil 625.177 568.445 828.842 531.395 2.553.859 -8%

Total 2.342.099 2.454.617 2.486.897 2.504.597 9.788.210 17%

M.U.: MT

Fleet/ProductExecution

Variação Homóloga1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Transported

quantitiesCabotagem Fleet 1.018.883 953.435 866.446 995.975 3.834.739 -32%Domestic Use 1.008.866 937.620 858.080 982.592 3.787.158 -32%

Diesel 569.725 545.453 463.788 553.185 2.132.151 -39%

Gasoline 353.605 277.617 234.381 297.750 1.163.353 -30%

Kerosene 1.186 - - - 1.186 -63%

Jet A1 3.077 4.878 2.570 2.677 13.202 -65%

LPG 81.273 109.672 157.341 128.980 477.266 43%

Export 10.017 15.815 8.366 8.927 43.125 -2%Diesel 5.897 11.113 5.892 4.987 27.889 -6%

Gasoline 1.845 2.248 1.714 1.623 7.430 12%

Jet A1 2.275 2.454 760 2.317 7.806 -1%

Import - - - 4.456 4.456 -67%Lubricants & Oil - - - 4.456 4.456 -67%

LNG Fleet 350.871 350.241 278.594 337.366 1.317.072 n.aLNG 350.871 350.241 278.594 337.366 - n.a

Total 1.369.754 1.303.676 1.145.040 1.333.341 5.151.811 -8%

4.3.2 CRUDE OIL, REFINED AND GAS TRANSPORTATION BUSINESS

Table 25 Volume of crude oil transported

Table 26 Volume of oil derivative products transported by segment

The transport of crude oil and its derivatives amounted to 14,940,021 metric tons.

Suezmax (74%) and Cabotagem (26%) fleets were responsible for transporting 9,788,210 metric tons of crude oil, representing a 17% decrease when compared with the previous year.


48 49

The transport of refined products also decreased 8%, following the same basis of comparison. Cabotagem fleet repre-sented 74% of the total volume of pro-ducts transported while the LNG fleet represented only 26%.

Graphic 9Refined products and gas transportation

LPG9%

Diesel42%

Kerosene0%

Lubr. & Oil0%

Gasoline23%

LNG26%

Even so, Diesel was the most transported refined product, representing 41.9% due to its multipurpose use (transport and indus-try), followed by LNG with 25,6%, Gasoline with 22.7%, LPG with 9.3% and Jet A1, Lu-bricants and Kerosene with 0.5%.

The Logistics and Distribution segment recorded sales equi-valent to AOA 743,645 million in 2017 and an EBITDA of AOA 148,332 million, corresponding to 10% of the total EBITDA re-corded by Sonangol.

The increase in the prices of refined products, as a conse-quence of the elimination of the price subvention, had a direct impact on this segment. There was a reduction of 1% and 15%, respectively, in the purchase of refined products and marke-ted products when compared to 2016. Meanwhile, it should

4.4 PRIMARY CHAIN – DOWNSTREAM SEGMENTbe noted that 36% of the total amount supplied originated from the domestic market.

In the Logistics activity, and in line with the contraction of demand, there was a general reduction in volumes supplied (decrease of 10%) and in storage capacity (decrease of 22%). The latter was due to the termination of the vessel rental agreement for floating storage.

Regarding the Distribution ac-tivity, the most traded products continue to be Gasoline and Die-sel, representing more than 70%

of sales, especially in the Con-sumer and Retail segment. Even though these are the segments with the highest consumption, they are also the most competi-tive ones.

In the international market, there was also a reduction in exports of Crude Oil (3% decrea-se), while the exports of refined products increased 8%. During the period, 4,797,032 MT

of refined crude oil products were acquired, registering a 1% decrease when compared with the previous period, due to the retraction in the consumption of oil derivatives.

4.4.1 LOGISTICS BUSINESS4.4.1.1 PROCUREMENT

Table 27 Acquisition of refined products by origin

M.U.: MT

ProductsExecution

Variance1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Supplied Quantity

Import 605.149 726.313 1.067.573 835.228 3.267.227 -7%Sonangol Logística 595.276 716.145 1.048.015 855.059 3.214.495 -6%Diesel 363.253 455.131 764.786 640.536 2.223.706 -5%

Gasoline 232.023 261.014 283.229 181.559 957.825 -7%

Jet A1 - - - 32.964 32.964 0%

Sonagás - - 1.600 - 1.600 -98%LPG - - 1.600 - 1.600 -98%

Sonangol Distribuidora 9.873 10.168 17.958 13.133 51.132 113%Gasóleo (MGO) - - - - - -100%

Asphalt 9.873 10.168 17.958 13.133 51.132 113%

Luanda’s Refinery 279.581 269.402 287.972 285.720 1.122.675 9%Diesel 152.595 141.180 157.787 157.891 609.453 2%

Gasoline 11.211 11.719 15.500 15.203 53.633 91%

Jet A1 70.047 71.933 72.196 72.967 287.143 28%

Jet B 17.120 17.079 14.283 11.538 60.020 -20%

Kerosene 21.399 19.964 21.805 22.514 85.681 11%

LPG 7.209 7.527 6.401 5.607 26.744 -2%

Topping Malongo 20.551 19.574 19.993 19.882 80.001 5%Diesel 15.593 14.889 14.894 14.798 60.175 -2%

Jet A1 606 484 411 387 1.889 -34%

Kerosene 4.352 4.200 4.688 4.697 17.937 48%

Sanha Gás 32.869 33.886 41.132 36.961 144.848 -15%LPG 32.869 33.886 41.132 36.961 144.848 -15%

Angola LNG 38.035 46.952 48.487 48.807 182.281 266%LPG 38.035 46.952 48.487 48.807 182.281 266%

Total 986.058 1.106.295 1.483.116 1.239.731 4.797.032 -1%

From total acquisitions, 68% came from the foreign market and the remaining 32% from the domestic market.

Despite the decrease in its ge-neral performance, purchases to

Refinaria de Luanda registered a 9% increase when compared with the same period in 2016, due to the production increase for Gasoline and Jet A1.


50 51

Table 28 Refining products procurement

Table 29 Storage Capacity

M.U.: MT

ProductsExecution


Diesel 531.441 611.201 937.467 813.225 2.893.334 -18%

Gasoline 243.234 272.733 298.729 196.762 1.011.458 -4%

Jet A1 70.653 72.417 72.607 73.354 289.032 27%

Jet B 17.120 17.079 14.283 11.538 60.020 -20%

Kerosene 25.751 24.164 26.492 27.210 103.618 16%

Asphalt 9.873 10.168 17.958 13.133 51.132 113%

LPG 78.113 88.365 97.621 91.375 355.473 12%

Total 976.185 1.096.127 1.465.158 1.226.598 4.764.068 -10%

U.M.: M3

Av erage Storage Capacity

ExecutionVariance

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Supplied QuantityOn shore 358.510 358.510 358.510 358.510 358.510 -6%

Floating 340.170 340.170 340.170 340.170 340.170 -34%

Total 698.680 698.680 698.680 698.680 698.680 -22%

The products with the highest volume of supply were Diesel (53%) and Gasoline (25%), totalling 79%. There was an increase in the volumes of LPG (12%) and a slight increase in the volume of Jet A1 (15%), when compared to 2016.

The storage capacity of refined products was 698.680 M3, of which 358.51 0 M3 were onshore and 340.1 70 on floating storage vessels, a decrease of 22% when compared to the the previous year. This decrease is due to the

4.4.1.2 STORAGE

withdrawal of Múcua ship, within the readjustment of the needs of the company, having resulted in the termination of the lease contract of that unit.

A total of 3,638,761 MT of oil deri-vative products were sold, cor-responding to a decrease of 15% compared to the previous period.

This reduction is explained by the contraction of demand, given the current national economic situa-tion.

Diesel and gasoline remain the most traded products, represen-ting together 73% of the quantities sold.

By business segment, there is a greater representativeness for the consumer sec-tor, due to the supply of diesel for thermal power stations.

4.4.2 DISTRIBUTION BUSINESS4.4.2.1 SALES

Table 30 Quantities of Refined Products Sold

M.U.: MT

ProductExecution


Diesel 521.067 508.238 464.234 532.204 2.025.744 -23%

Gasoline 163.675 159.050 161.355 158.871 642.951 -22%

LPG (Butane G as) 77.133 80.484 82.330 80.945 320.892 44%

Jet A1 64.408 65.782 68.647 71.065 269.901 7%

Other 20.182 12.966 96.149 18.386 147.683 1075%

Jet B 17.033 12.027 18.561 22.821 70.443 -9%

Asphalt 1.671 5.883 12.564 40.932 61.049 136%

Fuel Extra Heavy 35.592 1.282 313 6.013 43.199 -71%

Kerosene 11.315 13.139 7.498 4.551 36.503 -33%

Fuel Oil 1500 - - - 11.005 11.005 37%

Lubricants 2.706 2.369 2.346 1.821 9.242 -34%

Cutback 24 44 66 - 134 -86%

Aviation Gas 5 - 8 3 16 -100%

Total 914.811 861.265 914.070 948.615 3.638.761 -15%

Graphic 10Sales of Refined Products by Business Segment

45%

32%

15%

8%

0,28%

49%

33%

11%6%

0,35%0%

10%

20%

30%

40%

50%

60%

Consumption Retail Navy Aviation Lubricant

2017 2016


52 53

Graphic 11Market Share by Business Segment

100%92% 86%

56%

72%

100% 100%89%

60%66%

0%

20%

40%

60%

80%

100%

120%

Navy Aviation Consumption Retail Lubricants

Mar

ket s

hare

2017 2016

The Retail and Consumer segments are the ones that face the greatest competition and, thus, registered de-creases in its Market Share in 2017. On the other hand, the market share in the Lubricant segment increased 6% due to the stabilisation of the production unit.

5,6%Cabinda(17)

6%Zaire(12)

0,9%Uíge(26)

0,5%Bengo(7)57,7%

Luanda(89)

0,7%Cuanza Norte(4)

2,1%Malanje(18)

0,7%Lunda Norte(8)

1,1%Bié(16)

2,8%Moxico(11)

0,9%Cuando Cubango(12)

0,3%Lunda Sul(9)1,6%

Cuanza Sul(21)

8,2%Benguela(52)

3,8%Huambo(50)

2%Namibe(16)

4,4%Huíla(43)

0,8%Cunene(8)

5 Major consumption centers

(#) Number of operational PA’s

5 Smallest consumer centers

Other consumer centers

Figure 3Sales of Refined Products by Regions

The provinces of Luanda, Benguela, Zaire, Cabinda and Huíla continue to lead the consumption of refined products, representing 82% of the total recorded in the period.

Foreign sales of crude oil decre-ased 3% when compared with the same period of 2016, with 198,301,082 barrels exported.

This decrease was due to a slight decrease in Sonangol’s Exporta-tion Rights during 2017. However, there was an increase in revenues,

4.4.3 INTERNATIONAL SALES4.4.3.1 CRUDE OIL

Table 31 Exports of crude oil by types

U.M.: Bbls

Exported TypesExecution


QuantityDália 4.624.518 8.410.537 9.239.320 11.116.434 33.390.809 19%

Saturno 7.355.548 6.414.777 6.391.202 5.435.306 25.596.833 -14%

Cabinda 5.594.177 6.449.950 6.404.239 6.494.517 24.942.883 15%

Nemba 5.671.775 5.749.208 5.701.543 6.697.587 23.820.113 -7%

Girassol 5.135.506 3.917.805 3.961.685 4.957.618 17.972.614 -12%

Paz-flor 3.756.048 1.947.787 2.765.414 3.671.129 12.140.378 44%

Mondo 2.777.320 2.762.183 2.706.385 2.866.678 11.112.566 7%

Hungo 3.623.917 1.842.596 4.667.001 - 10.133.514 -36%

Sangos 2.718.548 1.855.762 2.720.532 1.813.867 9.108.709 -24%

Kissanje 1.809.652 1.855.970 1.891.373 2.762.341 8.319.336 -17%

Olombendo 410.926 1.946.315 2.814.199 1.811.919 6.983.359 n.a

CLOV 1.000.554 1.001.546 2.003.079 954.840 4.960.019 -2%

Saxi-batuque 940.027 955.624 916.882 1.903.865 4.716.398 -28%

Palanca 1.022.065 - - 986.646 2.008.711 2%

Plutónio 980.257 - 949.911 - 1.930.168 -60%

Gimboa - 547.989 - 534.817 1.082.806 -36%

Lianzi 81.866 - - - 81.866 -96%

Total 47.502.704 45.658.049 53.132.765 52.007.564 198.301.082 -3%

due to the positive performance of the Angolan oil types, driven by a strong demand from Asian refiners as well as the global shortage of the supply of heavy oil types that ended up contributing positively to a better positioning of Sonangol in the negotiations of these oil types.


54 55

The biggest responsibility for crude oil exported fell on the Dália type with 18%, Saturn with 14%, Cabinda with 13%, Nemba with 13% and Girassol with 9%, corresponding to 67% of the total volume traded. On the other hand, the oil types with less weight on the exports were Lianzi, Gimboa, Palanca and Plutónio, that totalled only 3%.

Graphic 12Exports of crude oil by type

Other3%

Nemba13%

Dália18%

Cabinda13%

Mondo6%

Hungo5%

Sangos5% Kissanje

4%Olombendo4%

Girassol9%

Paz-flor6%

Saturno14%

Figure 4 Destination of the crude oil

Canada3,9%

Portugal1,5% Spain

2,4%

South Africa2,4%

India11,2% China

69,6%Japan1%

Thailand0,3%

Indonesia0,5%

Taiwan2,8%

Malaysia2,1%

Italy0,2%

USA1%

Colombia1,2%

China (70%) and India (11%) were the main responsible for imports of Angolan crude oil, having bought 81% of Angolan crude oil during 2017.

During the period, the Angolan oil types reached the maximum weighted price of 68.08 USD/Bbl and the minimum price of 44.60 USD/Bbl, corresponding to a weighted avera-ge of 54.14 USD/Bbl in the period.

* The prices of Angolan types are indexed at the dated Brent (crude oil extracted in the North Sea and traded on the London Stock Exchange); Angolan oil type price = price Brent dated + Premium/discount.

Table 32 Crude oil exports by destination

M.U.: MT

DestinationExecution


QuantityChina 37.983.356 31.438.574 32.291.649 36.306.420 138.019.999 8%

India 3.898.292 5.898.929 6.766.699 5.719.290 22.283.210 12%

Canada 905.911 2.123.643 3.764.940 954.840 7.749.334 -8%

Taiwan 946.807 - 1.849.288 2.836.431 5.632.526 n.a

South Africa - - 1.854.134 2.849.416 4.703.550 -18%

Spain 907.060 997.000 908.245 1.859.423 4.671.728 -2%

Malasya 1.306.718 950.843 1.888.940 - 4.146.501 12%

Portugal 1.004.560 956.057 1.002.100 - 2.962.717 -49%

Colombia - 957.077 1.405.384 - 2.362.461 n.a

Japan - 1.952.854 - - 1.952.854 n.a

U.S.A. - - 1.401.386 534.817 1.936.203 -1%

Indonesia - - - 946.927 946.927 n.a

Thailand 550.000 - - - 550.000 n.a

Italy - 383.072 - - 383.072 -60%

Total 47.502.704 45.658.049 53.132.765 52.007.564 198.301.082 -3%

4.4.3.2 PRICE OF THE ANGOLAN TYPESGráfico 13Evolução do Preço do Brent e Ramas Angolanas

54,67 55,11

51,5652,54

50,4348,47

49,2251,64 56,05

57,36

62,6264,19

53,61 54,28

50,87 51,3349,89

46,21

48,45

51,48

56,4958,42

62,6565,07

40,00

45,00

50,00

55,00

60,00

65,00

70,00

Janeiro Fevereiro Março Abril Maio Junho Julho Agosto Setembro Outubro Novembro Dezembro

USD/

Bbl

Brent Datado 2017 Ramas Angolanas 2017


56 57

In the last months of the year, the Angolan oil types were sold with a premium due to the low freight rates, the good margins of the medium and heavy distillates and the decrease of the Brent/Dubai differential.

The Angolan oil types, being medium oil types, adapt easily to a wider range of refiners at global

The volume of exported refined products was 1,467,920 metric tons, corresponding to an increase of 8% when compared with the same period in 2016, resulting from the increase in the production of Propane Gas by the ALNG plant.

level, independently of the market conditions. In this sense, the posi-tive behaviour of the differentials was more notorious in the heavier oil types, as a consequence of the dominant demand in the interna-tional market and due to the more favourable seasonal periods for these oil types.

4.4.3.3 EXPORT OF REFINED PRODUCTSTable 33 Quantity of Exported Refined Products

M.U.: MT

Refined Products

ExecutionVariance

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ExportedQuantity

Fuel Oil 275.706 220.348 283.762 197.457 977.273 2%

Naphta 64.328 60.469 64.039 62.793 251.630 -13%

Propane Gas 63.992 - 20.088 31.674 115.754 252%

Butane Gas 22.850 - 26.846 20.633 70.329 n.a

Diesel 5.898 10.918 5.892 4.987 27.695 -6%

Jet A1 1.416 2.426 1.516 12.288 17.646 -28%

Gasoline 1.845 2.411 1.715 1.623 7.594 15%

Total 436.035 296.572 403.858 331.455 1.467.920 8%

Graphic 14Quantity of Exported Refined Products

67%

17%

2%8% 5%

1% 1% 0%

70%

21%

2% 2% 2% 0%0%

10%

20%

30%

40%

50%

60%

70%

80%

Fuel oil Naphta Diesel Propane Gas Butane Gas Jet a1 Gasoline

Expo

rt o

f Ref

ined

Pro

duct

s

2017 2016

The year under review registe-red a 48% decrease of the hours flown in aviation activity compa-red to the same period of 2016.

The weak activity in the two seg-ments had a greater impact in the Rotary Wing segment, with a 79% decrease, mainly due to the fact that the client portfolio had only one contract of one Sikorsky S76C ++ with Sonangol P&P since April 2017, unlike the previous year, in which the client portfolio included, until July, the

4.5 NON-NUCLEAR BUSINESS4.5.1 AVIATION - SONAIR

4.5.1.1 ROTARY WING HOURS

Table 34Map of Sonair Operational Indicators

Operational IndicatorsExecution

Variance1st Quarter 2nd Quarter 3rd Quarter 3rd Quarter Services

RenderedNo. of Hours Flown 2.411 2.430 2.617 2.879 10.337 -48%No. of Hours Flown- Rotary Wing 621 454 594 412 2.081 -79%Commercial Contracting 595 309 398 212 1.514 -82%

Non-contractual 27 25 16 6 74 15%

Military House and Presidency of the Republic - 120 180 193 493 -66%

No. of Hours Flown- Fixed Wing 1.790 1.976 2.023 2.467 8.256 -16%SonAir Fleet 213 171 163 121 668 -56%Commercial Contracting 53 33 27 29 141 -87%

Non-contractual 160 138 136 92 526 17%

O ther (H.E, Carreira, Spots Charter) 1.456 1.504 1.578 2.209 6.747 1%

MAT and State 120 301 282 138 841 -49%Houston Express (Load Factor) 38% 40% 37% 36% 38% 5%Freight Transported (Ton) 29 26 19 28 102 -61%No. of Passengers Transported 49.174 50.861 51.492 53.992 205.519 -17%Average Aircraft Availability 64% 64% 60% 57% 61% -22%Aircraft Average Utilisation 82% 72% 85% 95% 83% -19%

contracts with oil companies. These constraints were origina-ted by the suspension (30-04-2016 until 19-03-2017) of the Super Puma fleet (H225 and L2) after an accident in the North Sea, which despite the lifting of the suspension, oil customers refused to use, leading to the cancellation of many contracts and greater use of the Sikorsky fleet. The low availability (3-4 aircraft) and the non-complian-ce detected in the audits to the Sikorsky fleet, led to the sus-

pension of contracts in Rotary Wing, making its services useful only for emergency situations.

On the other hand, due to finan-cial difficulties, it was not possi-ble to enable the Sikorsky fleet fully operational nor to acquire another alternative fleet. This makes the situation even more precarious considering that customers are sceptical of using SonAir S76 C ++.


58 59

The fixed-wing segment recorded a decrease of 16%, also resulting from the suspension of contracts, as occurred, since March 2017, with two companies that shared the contract for the B1900 aircraft. On the other hand, the State main-tained the contract for one Boeing 737, opposing to the previous year where there was a contract of ano-ther Twin otter type aircraft with the Government of the province of

4.5.1.2 FIXED-WING HOURSCuando Cubango. Related to this reduction was also the decrease of the Houston Express service from 3 to 2 frequencies since Septem-ber 2016.

With the termination of the con-tracts and the dissatisfaction of the oil customers with the Sikor-sky S76C ++ fleet, the number of passengers reflected a reduction of 82%.

The use of the capacity available on Satellite - VSAT, Band C, decre-ased 0.5% in relation to the same period, mainly due to the deacti-vation of services by one company, as it failed to comply with the settlement terms, raising severe constraints to MSTelcom with its supplier.

The number of telephone lines increased by 2.6% when compared to the same period in 2016, due to

4.5.2 TELECOMMUNICATIONS – MSTELCOMTable 35 MSTELCOM Indicators Map

Operational IndicatorsExecution

Variance1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Services

Rendered

1. Utilisation of Available Capacity (%)

1. 1 Satelite - VSAT (MHZ)

A. Band - C 96% 96% 99% 99% 99% 0,5%

B. Band - Ku 100% 100% 100% 100% 100% 0,0%

2. Volume of Services Rendered

Telefonia (no. of telephone lines) 34.136 35.005 35.093 35.105 35.105 2,6%

Voice traffic (minutes) 14.491.343 17.055.231 27.952.760 22.172.653 81.671.987 -10,3%

3. Customers

Average number of complaints p/100 Cus-tomers 4,74 5,06 5,06 4,70 4,89 8,5%

Satisfaction Index of MST Customers (scale from 1 to 10) 3,55 3,55 3,55 3,55 3,55 0,0%

the activation of telephone lines to several customers.

There was a reduction of voice traffic (minutes) by 10.4% over the same period, as a result of market competition. It should be noted, however, that the billing of voice minutes of the interconnection services took place with a one month delay, due to the billing con-firmation and acceptance process by the interconnection operators.

On the other hand, the average number of complaints per 100 clients increased by 8.5% over the same period, due to the lack of equipment, interruptions in the fiber optic network and electrical system, lack of funds for payment of daily allowances and mainte-nance service suppliers.

4.5.3 HEALTH – CLÍNICA GIRASSOL

In the period under review, the-re was a decrease of 16% in the number of patients treated at Clínica Girassol, compared to the same period in 2016.

The number of patients hospita-lised at the Clinic decreased by 33%, while the average hospital occupancy rate decreased by 42% when compared to 2016.

Table 36 Map of Operational Indicators of Clínica Girassol

Operating IndicatorsExecution

Variance1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Services

RenderedNumber of patients treated 42.606 41.460 39.490 43.527 167.083 -16%

Number of hospitalizations 1.813 1.710 1.416 1.455 6.394 -33%

Number of outpatient visits 25.733 23.586 23.121 25.524 97.964 -11%

Number of emergency visits 11.844 14.384 12.481 46 38.755 -29%

Number of laboratory exams 168.811 174.570 150.164 9.478 503.023 -43%

Number of surgical interventions performed 282 257 185 109.843 110.567 9145%

Number of surgical procedures in day-care center (day clinic) 177 160 203 188 728 3%

Average Hospital Occupancy Rate 54% 55% 41% 44% 48% -42%

Number of completed deliveries (Etococcal and dystocic) 161 167 155 155 638 -4%

Number of imaging tests performed 13.504 12.016 10.371 6.346 42.237 -36%

Total Surgeries 459 417 388 110.031 111.295 5745%

Average lenght of Hospital stay (in day) 6 6 6 6 6 1%

Number of specialised examinations performed 27.661 26.618 23.228 26.483 103.990 50%


60 61

The year 2017 was marked by an effort to adjust Sonip’s activity to the reality of the Sonangol Group. Thus, the new Executive Committee has prioritized the identifica-tion and implementation of measures with immediate impact on cost containment and revenue collection, as well as the rigorous assessment and analysis of mana-gement information, essential for decision-making.

4.5.4 REAL ESTATE MANAGEMENT – SONIPThe current stock up to the reporting date was 23 pro-perties, 18 in the M’bembo M’bote condominium (Cabin-da) and 5 in the Mazozo condominium (South Kwanza), which were not sold in accordance with Deliberation No. 033/2016 of 28 June of the Board of Directors of Sonan-gol EP, as shown in the table below:

Table 37Sold Real Estate

Condominium Initial Stock Sales Final Stock % per condominium

M´bembo M´bote 18 0 18 0%

Mazozo 5 0 5 0%

Total 23 0 23 0%

4.5.5 TRAINING – ACADEMIA SONANGOLTable 38 Main Indicators of Education and Training

IndicatorsExecution

Variance1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total

1. TRAINING1.1 Number of Training Courses (Unit) 347 357 341 288 1.333 -19%

1.1.1 Escola Petrotécnica e Engenharia - - - - - -100%

1.1.2 Leadership and Management School 1 - - - 1 -83%

1.1.3 Safety School 321 357 341 288 1.307 -20%

1.1.4 Lab - ISPTEC 25 - - - 25 n.a

1.2 Number of Training Hours 3.816 3.908 3.732 2.932 14.388 -13%



1.2.3 Safety School 3.380 3.908 3.732 2.932 13.952 -15%

1.2.4 Lab - ISPTEC 420 - - - 420 n.a

1.3 Number of Courses Delivered 30 23 27 24 34 55%


1.3.2 Leadership and Management School 1 - - - 1 0%

1.3.3 Safety School 21 23 27 24 25 25%

1.3.4 Lab - ISPTEC 8 - - - 8 n.a

1.4 Number of Trainees 2.631 3.062 2.889 1.971 10.553 -31%



1.4.3 Safety School 2.509 3.062 2.889 1.971 10.431 -32%

1.4.4 Lab - ISPTEC 95 - - - 95 n.a

2. SCHOLARSHIP

2.1 Number of Scholarships Offered 1.917 1.644 1.536 1.517 1.517 -18%

2.1.1 Internal 525 412 415 415 415 -24%

2.1.2 External 1.392 1.232 1.121 1.102 1.102 -16%

3. ISPTEC 2.406 2.372 2.072 2.113 2.113 25%

3.1 Dpt. of Engineering and Technology 1.565 1.534 1.367 1.382 1.382 28%

3.1.1 Civil Engineering 229 221 209 210 210 48%

3.1.2 Electrical Engineering 207 205 174 178 178 32%

3.1.3 Computer Engineering 273 267 230 228 228 27%

3.1.4 Mechanical Engineering 249 243 213 215 215 41%

3.1.5 Industrial Production Engineering 288 282 245 252 252 15%

3.1.6 Chemical Engineering 319 316 296 299 299 20%

3.2 Dpt. of Applied Social Sciences 841 838 705 731 731 19%

3.2.1 Economy 419 419 356 368 368 19%

3.2.2 Management 422 419 349 363 363 19%


62 63

Sonangol, in respect to its res-ponsabilities reagarding training and qualification of its human resources, of the oil sector and the economy in general, per-formed 1,333 training actions, representing a decrease of 19% when compared to the previous year.

In terms of workload, 14,388 training hours were provided in 34 courses. Compared to the same period of 2016, there was a reduction of 13% in training hours, but a 55% increase in the number of courses offered, whi-ch demonstrates the Academy’s

In the period under review, the Company did not use international bank funding to finance its structuring capital projects and other operating expenses, in accordance with the annual budget.

In 2017, Sonangol had a total effective staff of 8,099 active employees, re-presenting a decrease of 1.47% when compared to the same period in 2016.

effort to offer a greater number of training courses.

Under the scholarship program, the Academy managed a total of 1,517 scholarships, of which 415 were internal and 1,102 external.

The Academy is responsible for managing the scholarship process, with guidelines from Sonangol, in 5 main geogra-phies: USA, UK, France, Brazil and Portugal. In 2017 no new scholarships were granted, but the current contracts with the scholarship holders were main-tained.

The Safety school continues to teach safety courses to the oil industry, certified by internatio-nal maritime authorities. The material of its maritime training centre is fully certified according to ISO 9000.

In the academic year 2017, ISPTEC accepted a total of 2,113 trainees, of which 1,382 were in engineering and technology and 731 trainees in applied social sciences, representing 65% and 35% of the total number of stu-dents, respectively.

4.6 CORPORATE & FINANCING

4.6.2 HUMAN RESOURCES

4.6.1 FUNDING

4.6.2.1 ACTUAL COMPOSITION

Graphic 15Number of Sonangol Employees

2.117

1.454

481

2.2081.8392.012

1.486

481

2.264

1.738

0

500

1000

1500

2000

2500


Exploration and Production

Refining and Transportation

Logistics and Distribution

Non-NuclearBusiness

2017 2016

Sonangol E.P. was the most represented company, with 26% of the active labour force, followed by Sonangol Distribuidora with 18%. By business segment, the largest portion of the workforce is concentrated in the Logistics and Distribution segment (27%), followed by the Corporate and Financial seg-ment (26%) and Non-Nuclear Business (23%).

The labour force of Sonangol is represented mostly by men (71.84%).

Graphic 16Workforce by Business Segment

Logistics andDistribution

27% Non-Nuclear Business

23%

Exploration and Production

18%

Refining andTransportation

6%


26%

Graphic 17Effective by Functional Band

MiddleManagement

7%

TechnicianSpecialist

7%

Senior Management

5%

Operational and Administrative Support

33%

Technicians48%

In terms of distribution of effective employees by functional band, 48% belonged to the technical category, 33% to the Operational and Administrative Support category, 11% to the Manager category and 7% to the Specialist category.

The average age of Sonangol employees is 44 years.


64 65

4.6.3 ORGANIZATION AND CORPORATE PROCESSES4.6.3.1 NEW QSSA POLICY Sonangol is committed to identifying, assessing and managing the risks for Quality, Safety, Health and Environment in order to ensure the prevention of accidents, environmental pre-servation and legal compliance and the satisfaction of its customers.

For the Sonangol Group, QSSA is more than a priority, it integrates the values and culture of the Company, thus covering its employees, service providers, customers and the communi-ties in which it operates.

During 2017, the Company made efforts to reinforce the 12 Basic Safety Rules (a tool focused on areas regarded as critical for accident prevention), preventing the occurrence of casualties and promoting the maintenance of the continuous trend of reducing accidents at work.

Graphic 18Sonangol, E.P and Subsidiaries’ Safety Performance Indicators

TFCA – Accidents frequency rate with absenceTFSA – Accidents frequency rate without absence

1,63 1,83

3,37

4,73

1,00

4,00

7,00

10,00

2017 2016TFCA TFSA

The strengthening and implemen-tation of tools to support com-pliance with legal requirements, the prevention of environmental accidents, the proper manage-ment of waste generated by the Company, as well as environ-mental awareness actions, were prominent areas for the Company.

At the Quality level, the Sonangol group’s customer satisfaction index was 78% during 2017, mainly affected by the scarcity in the dis-

tribution of refined products. The businesses with the best satisfac-tion index were related to the sale of crude oil and refined storage, 92% and 90%, respectively.

During the period, 73% of the received customer complaints were processed, representing an improvement against 68% in the previous year, with a positive impact of the telecommunications and crude sales businesses, with a 100% degree of handling.

The fuel distribution, aviation, re-fining and crude sales businesses are certified. The financial crisis prevented the execution of certi-fication audits to the fuel storage and distribution business as well as to the telecommunications business.


COMMITMENT TO SOCIETY

05


68 69

COMMITMENT TO SOCIETY

05

Transform resources into social welfareThe commitment of Sonangol to the sustained development and stabilization of the Angolan nation is a premise conveyed in its philo-sophy. Sonangol works to improve the conditions for the development of Angola by supporting projects in the areas of education, culture, sports, science and environment.

Sonangol supervises the execution of social projects as well as the relationship with the operators in its Social Investment Plans (PIS), which are funded through Cost-Oil or contributions for social projects.

Internal Social Responsibility • Social care for different social and health issues, psychosocial analysis, employee mapping and workshops that encourage im-provements in the quality of life;

• Within the initiative enabling the Sustainability Report of Sonair, a Workshop was held, with sixteen (16) sessions, two of which were one day sessions, which were attended by 345 employees, started on 26 June;

• Opening of the culture and arts school Paz Flor;

External Social Responsibility • By the end of 2017, 347 spon-sorship applications were recei-ved of which 32 were approved and paid;

• The analysis, opinion and monitoring of Sonangol’s social investments via Oil Operators from Cost-Oil and contributions were performed in 64 social projects in the amount of USD 39,263,650.40;

• The primary school São José Freidemetz was built by Sonan-gol in partnership with Asso-ciação do Bloco 15, budgeted at USD 400 thousand and com-prised of 10 classrooms with a capacity for 1,000 students;

• Support to the Quengela Educational Program, with a professional training of two hundred and twenty-six (226) young students from primary and preparatory education;

• The funding for the cons-truction of a general educa-tion school, in the Kinganga Mavacala urbanisation was performed with the companies associated with the Angola LNG project. This school comprises 15 classrooms with a capacity for 35 students each;

• A primary school budgeted at USD 500 thousand and compri-sed of 8 classrooms was built in the city of Amboim/Cuanza-Sul by Sonangol, in partnership with Total E&P Angola.


PROSPECTS FOR THE FUTURE

06


72 73

PROSPECTS FOR THE FUTURE

06

In the current framework, cha-racterized by a sharp decrease in crude oil production, an effort is being made to increase the exploration and production acti-vity, aiming to discover resources to increase the rate of substi-tution of reserves, based on the trinomial resources – reserves – production, to sustain production levels in the short, medium and long term.

To achieve this goal, the following actions have been defined:

• Optimization of production to mitigate the decline to en-sure base production;

• Development of new pro-jects to gradually increase current production;

• Transform resources into reserves.

The success of this strategy will depend on the timely engage-ment of all parties involved in order to comply with the estab-lished actions.

6.1 NEW PRODUCTIONThe deficit in the domestic production of oil derivative products re-quires an effort to import. The aim is to reverse this reality through a refining strategy based on the following three axes:

• Optimization of production of Refinaria de Luanda, aiming to increase the production of gasoline;

• Construction of a high-conversion refinery in Lobito city, with capacity to process up to 200,000 Bbl/day;

• Construction of a smaller capacity refinery in the province of Cabinda.

Sonangol’s transformation program aims to place the company on the crude oil and natural gas value chain and is in line with its intention to turn Sonangol into a reference company in the oil sector of the African Continent, committed to sustainability.

This program will be based on the execution of a set of initiatives, executed by multidisciplinary teams with specific technical knowledge, materialized in three operational Blocks of execution and a support block, namely: oil core business; financial restructuring and portfolio; regulatory framework and organizational sustainability.

6.2 REFINERY

6.3 TRANSFORMATION PROGRAM


PROPOSAL FOR THEAPPLICATION OF THE RESULTS

07


76 77

PROPOSAL FOR THE APPLICATION OF THE RESULTS

07

In accordance with Presiden-tial Decree No. 222/17 of 27 September (which establishes the policy for the application of results), the results of the Com-pany, after deductions, shall be applied as follows:

• 10% for constitution of the legal reserve, whose cumula-tive amount must not exceed 20% of the statutory capi-tal (Article 41, paragraph a of Presidential Decree No. 222/17);

• At least 10% for the es-tablishment of the fund for

Sonangol E.P. closed the 2017 financial year with a positive net profit of AOA 197,538,069,646. In accordance with paragraph 1 of Article 34 of the Companies Act, the company will not be able to distribute results until the accumulated losses of prior years are fully covered. These losses amount to AOA 398,178,245,423, as pre-sented in the Retained earnings of the individual Annual Accounts of Sonangol E.P.

We propose that the net profit for the Year to be fully applied to cover the losses of previous years, as it is necessary for this pur-pose. This proposal underpins the need to ensure the sustainability of the company to carry on with the implementation of the strategy of growth and solidity defined in the Transformation Program of Sonangol E.P.

7.1 RESULTS AND APPLICATION PROPOSAL

the evaluation of exploration potentials for hydrocarbon re-sources (Article 41, paragraph b of Presidential Decree No. 222/17);

• At least 5% for the other investments fund (Article 41, paragraph c of Presidential Decree No. 222/17);

• Up to 5% for the social fund (Article 41, paragraph d of Presidential Decree No. 222/17);

• Other Voluntary Funds approved by the Board of Di-

rectors and confirmed by the competent State bodies of the State;

• Distribution of individual incentives to employees and members of the management body, as profit sharing, within the limits set by the applicab-le legislation;

• Contribution to the General State Budget, through the distribution of dividends to shareholders (in accordance with Article 30, paragraph 2 of Decree No. 8/02).


78 79

8 ACRONYMSN/O Acronym Meaning

1 CON Congo Onshore

2 ALNG Liquefied Natural Gas Factory, located in Soyo

3 Bbl Barrels (159 liters)

4 Bbls Crude Oil Barrels

5 BOE Equivalent Oil Barrel

6 BOPD Oil Barrels per Day

7 EPC Engineering, Procurement, Construction

8 EPCI Engineering Procurement Construction and Installation

9 EPSCC Engineering, Procurement, Supply, Construction and Commissioning

10 ESSA Empresa de Serviços de Sondagem de Angola (Surveying Company)

11 FEED Front End Engineering Design

12 FPSO Floating Production, Storage and Offloading

13 FBE Fusion Bonded Epoxi

14 FS Fina Sonangol Association

15 FST Fina Sonangol Texaco Association

16 Km2 Square kilometers

17 Km Kilometers

18 KON Kwanza Onshore

19 KWIP Kungulo Water Injection Platform

20 LNG Liquefied Natural Gas

21 LPG Liquefied Petroleum Gas

22 M3 Cubic meters

23 MAT Ministério da Administração do Território (Ministry of Administration of the Territory of Angola)

24 MBbl Thousands of Barrels

25 Mbits/seg Millions of Bits Per Second

26 MINPET Ministério dos Petróleos de Angola (Ministry of Petroleum of Angola)

27 MSCF Thousand Standard Cubic Feet

28 MUSD Thousands of US Dollars

29 OCDE Organization for Economic Co-operation and Development (OECD)

30 OFE Owner Furnished Equipment

31 PSVM Plutão, Saturno, Vénus e Marte

32 SIS Sistema de Transmissão Inteligente de Segurança (Intelligent Security Transmission System)

33 TM Metric Tons

34 U.M. Unit of measurement

35 USD North American Dollar

36 USD/Bbl US Dollars per Barrel

37 WHP Wellhead Platform

38 ICSS Integrated Control and Safety Systems

39 GASOIL (MGO)

Marine Gasoil

DETAILED INDEX1 LETTER TO THE SHAREHOLDERS 62 SONANGOL E.P. 8

2.1 BUSINESS MODEL OF SONANGOL, E.P 102.2 CORPORATE BODIES 14

3 PERFORMANCE SUMMARY 183.1 EXECUTIVE SUMMARY 203.2 OPERATING PERFORMANCE – EBITDA 213.3 OPERATING PERFORMANCE – NET INCOME 223.4 INVESTMENTS 22

4 PERFORMANCE BY BUSINESS SECTOR 244.1 CONCESSIONAIRE 26

4.1.1 EXPLORATION 274.1.1.1 SEISMIC ACQUISITION 274.1.1.2 SEISMIC PROCESSING 274.1.1.3 SURVEY-EXPLORATION, EVALUATION AND DEVELOPMENT ACTIVITY 284.1.1.4 DEVELOPMENT PROJECTS 29

4.1.2 CRUDE OIL & GAS PRODUCTION 304.1.2.1 CRUDE OIL PRODUCTION 304.1.2.2 CRUDE OIL RIGHTS OF NATIONAL CONCESSIONAIRE 344.1.2.3 GAS PRODUCTION 36

4.1.2.3.1 PRODUCTION OF ASSOCIATED NATURAL GAS 364.1.2.3.2 LPG PRODUCTION 374.1.2.3.3 LNG AND CONDENSATES PRODUCTION 38

4.1.3 ECONOMIC MANAGEMENT OF CONCESSIONS 394.1.3.1 PRODUCTION COSTS 39

4.1.4 CONCESSIONAIRE EXPORTS 404.1.4.1 RECOVERY OF INVESTMENTS MADE IN PRODUCTION CONCESSIONS 41

4.2 PRIMARY VALUE CHAIN – UPSTREAM SEGMENT 424.2.1 PRODUCTION OF CRUDE OIL OF SONANGOL INVESTIDORA 424.2.2 GAS PRODUCTION OF SONANGOL E.P. 43

4.2.2.1 LPG PRODUCTION 434.2.2.2 LNG PRODUCTION AND CONDENSATES 44

4.3 PRIMARY VALUE CHAIN – MIDSTREAM SEGMENT 444.3.1 REFINING BUSINESS 444.3.2 CRUDE OIL, REFINED AND GAS TRANSPORTATION BUSINESS 47

4.4 PRIMARY CHAIN – DOWNSTREAM SEGMENT 484.4.1 LOGISTICS BUSINESS 49

4.4.1.1 PROCUREMENT 494.4.1.2 STORAGE 50

4.4.2 DISTRIBUTION BUSINESS 514.4.2.1 SALES 51

4.4.3 INTERNATIONAL SALES 534.4.3.1 CRUDE OIL 534.4.3.2 PRICE OF THE ANGOLAN TYPES 55


80 81

4.4.3.3 EXPORT OF REFINED PRODUCTS 564.5 NON-NUCLEAR BUSINESS 57

4.5.1 AVIATION - SONAIR 574.5.1.1 ROTARY WING HOURS 574.5.1.2 FIXED-WING HOURS 58

4.5.2 TELECOMMUNICATIONS – MSTELCOM 584.5.3 HEALTH – CLÍNICA GIRASSOL 594.5.4 REAL ESTATE MANAGEMENT – SONIP 604.5.5 TRAINING – ACADEMIA SONANGOL 61

4.6 CORPORATE & FINANCING 624.6.1 FUNDING 624.6.2 HUMAN RESOURCES 62

4.6.2.1 ACTUAL COMPOSITION 624.6.3 ORGANIZATION AND CORPORATE PROCESSES 64

4.6.3.1 NEW QSSA POLICY 645 COMMITMENT TO SOCIETY 666 PROSPECTS FOR THE FUTURE 70

6.1 NEW PRODUCTION 726.2 REFINERY 736.3 TRANSFORMATION PROGRAM 73

7 PROPOSAL FOR THE APPLICATION OF THE RESULTS 747.1 RESULTS AND APPLICATION PROPOSAL 76

8 ACRONYMS AND ABBREVIATIONS 78

SUBTITLESGraphics:Graphic 1 - EBITDA by business segment (AOA million) ....................................................................................................... 21Graphic 2 – Net income by business segment (AOA million) ................................................................................................. 22Graphic 3 - Investments execution by segment ..................................................................................................................... 23Graphic 4 – Crude oil production in Angola by block ............................................................................................................. 31Graphic 5 - Crude oil production by operator......................................................................................................................... 32Graphic 6 – Concessionaire’s crude oil rights by block ......................................................................................................... 35Graphic 7 - LPG production by origin ..................................................................................................................................... 37Graphic 8 - Production profile of refined products ............................................................................................................... 46Graphic 9 - Refined products and gas transportation ............................................................................................................ 48Graphic 10 - Sales of Refined Products by Business Segment ............................................................................................. 51Graphic 11 – Market Share by Business Segment ................................................................................................................. 52Graphic 12 - Exports of crude oil by type ............................................................................................................................... 54Graphic 13 - Evolution of the Brent Price and Angolan Types ............................................................................................... 55Graphic 14 - Quantity of Exported Refined Products ............................................................................................................. 56Graphic 15 - Number of Sonangol Employees ....................................................................................................................... 62Graphic 16 – Workforce by Business Segment ...................................................................................................................... 63Graphic 17 - Effective by Functional Band ............................................................................................................................. 63Graphic 18 – Sonangol, E.P and Subsidiaries’ Safety Performance Indicators ..................................................................... 64

Tables:

Figures:

Table 1 – 201 7 Investment Program of Sonangol E.P ...........................................................................................................23Table 2 - Exploration activity [Seismic Acquisition] ...............................................................................................................27Table 3 - Seismic Processing Completed ...............................................................................................................................27Table 4 - Seismic Processing in Progress ..............................................................................................................................28Table 5- Exploration Wells ......................................................................................................................................................28Table 6 - Development Projects ..............................................................................................................................................29Table 7 - Crude oil production in Angola ................................................................................................................................30Table 8 - Rights of crude oil production by companies ..........................................................................................................31Table 9 - Crude oil production by operator.............................................................................................................................32Table 10 – Concessionaire’s crude oil rights ..........................................................................................................................34Table 11 - Production of Associated Natural Gas ..................................................................................................................36Table 12 - LPG production in Angola ......................................................................................................................................37Table 13 - LNG production in Angola ......................................................................................................................................38Table 14 - Condensate production in Angola .........................................................................................................................38Table 15 - Operation costs in production concessions ...........................................................................................................39Table 16 - Exports Map of Sonangol Concessionaire .............................................................................................................40Table 17 - Recovered Costs in Production Concessions ........................................................................................................41Table 18 - Crude Oil Production of Sonangol Investidora ......................................................................................................42Table 19 - Sonangol’s Share in LPG Production .....................................................................................................................43Table 20 - Sonangol’s Share in LNG Production.....................................................................................................................44Table 21 - Sonangol’s Share in Condensate Production ........................................................................................................44Table 22 – Average Utilization Rate of Installed Capacity ......................................................................................................45Table 23 - Volume of crude oil processed ..............................................................................................................................45Table 24 – Refined production ................................................................................................................................................45Table 25 - Volume of crude oil transported ............................................................................................................................47Table 26 - Volume of oil derivative products transported by segment ..................................................................................47Table 27 – Acquisition of refined products by origin ..............................................................................................................49Table 28 - Refining products procurement .............................................................................................................................50Table 29 - Storage Capacity ....................................................................................................................................................50Table 30 - Quantities of Refined Products Sold ......................................................................................................................51Table 31 – Exports of crude oil by types .................................................................................................................................53Table 32 – Crude oil exports by destination ...........................................................................................................................55Table 33 – Quantity of Exported Refined Products .................................................................................................................56Table 34 – Map of Sonair Operational Indicators ...................................................................................................................57Table 35 - MSTELCOM Indicators Map ...................................................................................................................................58Table 36 - Map of Operational Indicators of Clínica Girassol .................................................................................................59Table 37 – Sold Real Estate.....................................................................................................................................................60Table 38 – Main Indicators of Education and Training............................................................................................................61

Figura 1 – Sonangol, E.P. as an integrated oil and gas company ..........................................................................................11Figura 2 - Corporate Matrix of Sonangol, E.P. .......................................................................................................................12Figura 3 – Sales of Refined Products by Regions ...................................................................................................................52Figura 4 – Destination of the crude oil ...................................................................................................................................54

CONSOLIDATED FINANCIAL STATEMENTS2017


SUMMARYCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEET ................................................................................................................................. 90CONSOLIDATED INCOME STATEMENT BY NATURE ....................................................................................................... 91

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:1. BUSINESS ACTIVITY AND CORPORATE INFORMATION .............................................................................................. 922. ACCOUNTING POLICIES USED IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS ................ 93

2.1 BASIS OF PREPARATION AND PRESENTATION OF THE FINANCIAL STATEMENTS ..................................................932.2 JUDGMENTS, ESTIMATES AND SIGNIFICANT ASSUMPTIONS USED ........................................................................962.3 BASIS OF VALUATION ADOPTED IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS ................1012.4 CHANGES IN ACCOUNTING POLICIES ......................................................................................................................117

3. OPERATING SEGMENTS ...........................................................................................................................................1174. TANGIBLE FIXED ASSETS .........................................................................................................................................122

4.1 TANGIBLE FIXED ASSETS .........................................................................................................................................1224.A. OIL AND GAS PROPERTIES .......................................................................................................................................1244.B. REVERSIBLE ASSETS ...............................................................................................................................................126

5. INTANGIBLE ASSETS ................................................................................................................................................1275.1 DETAIL BY NATURE ....................................................................................................................................................1275.2 MOVEMENTS IN GROSS AMOUNT .............................................................................................................................1275.3 MOVEMENTS IN ACCUMULATED DEPRECIATION.....................................................................................................1275.A. EXPLORATION AND EVALUATION ASSETS ...............................................................................................................128

6. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES .................................................................................................1306.1 DETAIL BY TYPE OF MEASUREMENT ........................................................................................................................1306.2 DETAIL BY ENTITY – FINANCIAL INVESTMENTS – COST LESS IMPAIRMENT LOSSES ...........................................1316.3 DETAIL BY ENTITY – FINANCIAL INVESTMENTS – FAIR VALUE ...............................................................................133

7. OTHER FINANCIAL ASSETS ......................................................................................................................................1357.1 DETAIL BY NATURE ....................................................................................................................................................135

8. INVENTORIES ...........................................................................................................................................................1388.1 MOVEMENTS IN INVENTORIES ..................................................................................................................................138

9. OTHER NON-CURRENT ASSETS AND ACCOUNTS RECEIVABLE ................................................................................1399.1. DETAIL BY NATURE ...................................................................................................................................................1399.2 SUBSIDIARIES AND ASSOCIATES ..............................................................................................................................1409.3 OTHER RECEIVABLES ................................................................................................................................................1419.4 CONCESSIONAIRE RIGHTS – ASSETS .......................................................................................................................1429.5 TRANSACTIONS AS NATIONAL CONCESSIONAIRE ...................................................................................................142

10. CASH AND CASH EQUIVALENTS .............................................................................................................................14510.1 DETAIL BY NATURE ..................................................................................................................................................14510.2 DETAILS OF TRADING SECURITIES .........................................................................................................................146

11. OTHER CURRENT ASSETS ......................................................................................................................................14612. SHARE CAPITAL AND SUPPLEMENTARY CAPITAL CONTRIBUTIONS ......................................................................14713. RESERVES AND RETAINED EARNINGS ...................................................................................................................14715. LOANS ....................................................................................................................................................................150

15.1 INTERNATIONAL BANK LOANS ...............................................................................................................................15017. EMPLOYEE BENEFITS ............................................................................................................................................152

17.1 POST-EMPLOYMENT BENEFITS ..............................................................................................................................152

17.2 TYPE OF BENEFITS ..................................................................................................................................................15317.3 MOVEMENTS WITH POST-EMPLOYMENT BENEFITS ..............................................................................................15417.4 FAIR VALUE OF PLAN ASSETS .................................................................................................................................15517.5 ACTUARIAL GAINS AND LOSSES .............................................................................................................................15617.6 SENSITIVITY ANALYSIS ............................................................................................................................................156

18. PROVISIONS FOR OTHER RISKS AND CHARGES .....................................................................................................15718.1 DETAIL OF PROVISIONS FOR OTHER RISKS AND CHARGES ..................................................................................15718.2 PROVISIONS FOR LEGAL PROCEEDINGS ................................................................................................................15718.3 TAX CONTINGENCIES ...............................................................................................................................................15718.4 DISMANTLING PROVISIONS – SONANGOL AS AN INVESTOR ................................................................................15718.5 ABANDONMENT FUND (CONCESSIONAIRE) ..........................................................................................................158

19. OTHER NON-CURRENT LIABILITIES AND ACCOUNTS PAYABLE .............................................................................15919.1 DETAIL OF OTHER NON-CURRENT LIABILITIES AND ACCOUNTS PAYABLE .........................................................15919.2 TRANSACTIONS AS NATIONAL CONCESSIONAIRE .................................................................................................15919.3 STATE ........................................................................................................................................................................16019.4 CREDITORS – MINING ACTIVITIES ...........................................................................................................................16019.5 PENSION FUND ........................................................................................................................................................16019.6 CREDITORS - OVERLIFT ...........................................................................................................................................16019.7 OTHER CREDITORS ..................................................................................................................................................161

21. OTHER CURRENT LIABILITIES ...............................................................................................................................16222. SALES ....................................................................................................................................................................16323. SERVICES RENDERED ............................................................................................................................................16324. OTHER OPERATING INCOME ...................................................................................................................................16425. VARIATION IN FINISHED PRODUCTS AND WORK IN PROGRES ...............................................................................16426. CONCESSIONAIRE COST (SALES ON BEHALF OF THE STATE) ................................................................................16527. COST OF GOOD SOLD AND RAW MATERIALS CONSUMED .......................................................................................165

27.A. OIL AND GAS EXPLORATION AND OPERATING COSTS ..........................................................................................16628. PERSONNEL COSTS ...............................................................................................................................................16729. DEPRECIATION AND AMORTISATION ......................................................................................................................16830. OTHER OPERATING EXPENSES ..............................................................................................................................16831. FINANCIAL RESULTS ..............................................................................................................................................16932. NET GAINS/ (LOSSES) ARISING FROM SUBSIDIARIES AND ASSOCIATES ...............................................................17033. NON-OPERATING RESULTS ....................................................................................................................................17134. EXTRAORDINARY RESULTS ....................................................................................................................................17235. INCOME TAX ...........................................................................................................................................................17236. COMMITMENTS NOT REFLECTED IN THE BALANCE SHEET ...................................................................................17237. CONTINGENCIES ....................................................................................................................................................17338. SUBSEQUENT EVENTS ...........................................................................................................................................17339. GOVERNMENT AND OTHER ENTITIES GRANTS ......................................................................................................17540. BALANCES AND TRANSACTIONS WITH RELATED PARTIES ....................................................................................17541. INFORMATION REQUIRED BY LAW .........................................................................................................................17642. FINANCING GUARANTEES......................................................................................................................................17643. EXPLANATION ADDED FOR TRANSLATION .............................................................................................................176REPORT OF THE AUDITOR INDEPENDENT TO THE CONSOLIDATED ACCOUNTS ................................................................177OPINION OF THE AUDIT BOARD TO THE CONSOLIDATED ACCOUNTS ...........................................................................181ANNEXES .....................................................................................................................................................................182CONSOLIDATED FINANCIAL STATEMENTS...................................................................................................................184


CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS31 DECEMBER 2017

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 201731-12-2017 31-12-2016

AOA AOAASSETS

NON-CURRENT ASSETS

TANGIBLE FIXED ASSETS 4 833.867.089.852 937.802.927.657

INTANGIBLE ASSETS 5 35.477.064.092 65.059.719.976

OIL AND GAS UPSTREAM ASSETS 4A 2.370.485.025.148 2.447.205.577.713

REVERSIBLE ASSETS 4B - 167.395.967.501

EXPLORATION AND EVALUATION ASSETS 5A 451.174.932.728 724.759.575.062

INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES 6 601.791.286.099 470.928.863.134

OTHER FINANCIAL ASSETS 7 181.763.430.194 178.422.503.244

OTHER NON-CURRENT ASSETS 9 388.313.688.276 613.187.525.103

BANK DEPOSITS 10 274.858.738.713 222.410.168.298

TOTAL NON-CURRENT ASSETS 5.137.731.255.102 5.827.172.827.688

CURRENT ASSETS

INVENTORIES 8 126.240.720.456 100.547.093.054

ACCOUNTS RECEIVABLE 9 1.713.473.047.540 745.937.958.438

CASH AND CASH EQUIVALENTS 10 858.596.499.882 826.942.310.235

OTHER CURRENT ASSETS 11 7.298.087.974 8.080.175.562

TOTAL CURRENT ASSETS 2.705.608.355.852 1.681.507.537.289

TOTAL ASSETS 7.843.339.610.954 7.508.680.364.977EQUITY AND LIABILITIES

EQUITY

SHARE CAPITAL 12 1.000.000.000.000 1.000.000.000.000

SUPPLEMENTARY CAPITAL CONTRIBUTIONS 12 1.846.949.307.988 946.558.748.877

RESERVES 13 1.346.521.000.053 1.361.489.357.725

RETAINED EARNINGS 13 (2.062.527.331.053) (1.023.390.645.332)

FOREIGN EXCHANGE TRANSLATION ADJUSTMENTS (FINANCIAL STATEMENTS TRANSLATION) 1.067.706.825.505 838.166.239.916

NET PROFIT 27.365.021.947 13.281.678.224

TOTAL EQUITY 3.226.014.824.440 3.136.105.379.410

NON-CURRENT LIABILITIES

LOANS 15 610.597.380.607 1.144.568.504.953

EMPLOYEE BENEFITS 17 330.695.963.713 104.559.096.058

PROVISIONS FOR OTHER RISKS AND CHARGES 18 1.462.051.935.441 1.222.092.751.908

OTHER NON-CURRENT LIABILITIES 19 131.764.122.060 137.700.246.412

TOTAL NON-CURRENT LIABILITIES 2.535.109.401.821 2.608.920.599.331

CURRENT LIABILITIES

ACCOUNTS PAYABLE 19 1.693.082.336.491 1.151.232.809.152

LOANS 15 221.508.809.620 507.473.441.589

OTHER CURRENT LIABILITIES 21 167.624.238.582 104.948.135.495

TOTAL CURRENT LIABILITIES 2.082.215.384.693 1.763.654.386.236

TOTAL LIABILITIES 4.617.324.786.514 4.372.574.985.567

TOTAL EQUITY AND LIABILITIES 7.843.339.610.954 7.508.680.364.977

CONSOLIDATED INCOME STATEMENT BY NATURE FOR THE YEAR ENDED 31 DECEMBER 2017

31-12-2017 31-12-2016 AOA AOA

SALES 22 2.824.956.212.364 2.283.777.182.435

SERVICES RENDERED 23 66.306.650.759 153.224.082.059

OTHER OPERATING INCOME 24 24.781.109.444 14.892.561.009

2.916.043.972.567 2.451.893.825.503

VARIATION IN FINISHED PRODUCTS AND WORK IN PROGRESS 25 11.288.316.275 3.836.578.246

CONCESSIONAIRE COST (SALES ON BEHALF OF THE STATE) 26 (1.302.579.051.974) (895.401.469.527)

COST OF GOODS SOLD AND RAW MATERIALS CONSUMED 27 (401.832.108.410) (387.384.114.574)

OIL AND GAS EXPLORATION AND OPERATING COSTS 27A (275.095.318.224) (265.076.687.029)

PERSONNEL COSTS 28 (152.952.645.840) (157.888.458.184)

DEPRECIATION AND AMORTISATION 29 (425.011.738.358) (369.588.981.285)

OTHER OPERATING EXPENSE 30 (169.602.892.173) (224.713.290.176)

(2.715.785.438.704) (2.296.216.422.529)

OPERATING INCOME: 200.258.533.863 155.677.402.974NET FINANCIAL RESULTS 31 67.034.536.041 (54.032.242.686)

NET GAINS/ (LOSSES) ARISING FROM SUBSIDIARIES AND ASSOCIATES 32 22.452.427.371 4.155.000.522

NON-OPERATING RESULTS 33 (170.849.571.046) (8.528.579.984)

(81.362.607.634) (58.405.822.148)

PROFIT BEFORE TAX: 118.895.926.229 97.271.580.826INCOME TAX 35 (93.789.703.582) (84.068.375.918)

NET INCOME FROM CURRENT ACTIVITIES: 25.106.222.647 13.203.204.908EXTRAORDINARY RESULTS 34 2.258.799.300 78.473.316

NET PROFIT 27.365.021.947 13.281.678.224


92 93

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017

The Sociedade Nacional de Combustíveis de An-gola E.P. (hereinafter referred to as “Sonangol EP” or “Company” individually or “Sonangol Group” or “Group” when referred as Sonangol EP and the entities included in the consolidation perimeter, as defined by the Board of Directors of Sonangol E.P.) with headquarters in Rua Rainha Ginga n.º 29-31 – Luanda, Angola. Its main activity is to operate in the oil and gas industry from the early stage of explo-ration, appraisal and production of hydrocarbons (upstream), to all the related activities up to sale to the final customer (midstream & downstream). In accordance with Law No. 10/04 (Oil Activities Law), Sonangol EP was designated the Entity to which the Angolan State has granted the mining rights of explo-ration, development and production of liquid and ga-seous hydrocarbons. As the National Concessionaire, Sonangol E.P. is authorized to jointly perform petro-leum operations together with foreign or Angolan companies in national territory. These operations are substantiated in association contracts, production sharing agreements and service contracts with risk. The Group is present in various activities related with Oil and Gas, divided into 5 main segments, as follows:Corporate & Financing This segment includes the activities related with core financial investments and with the Sonangol Group financing.

UpstreamThis segment incorporates crude Oil and gas explo-ration and production activities onshore and offshore, either as operator or non-operator of joint arrange-ments.

MidstreamThis segment includes the activities of refining and transportation of crude oil, natural gas and by-pro-ducts.

1 BUSINESS ACTIVITY AND CORPORATE INFORMATIONDownstreamThis segment includes storage, supply and distribu-tion of crude oil and natural gas by-products to the final customer.

Non-coreThis segment includes all other Group activities, not related with the value chain of the oil and gas busi-ness.

These consolidated financial statements were appro-ved by the Board of Directors of Sonangol EP at the Board meeting held on 10 August 2018, being further subject to the approval of the Shareholder and Su-pervising Government member, which have the ability to change them after the authorisation for issue of the Board of Directors of Sonangol EP.It is the opinion of the Board of Directors of Sonan-gol EP that these consolidated financial statements present a true and fair view of the Sonangol Group operations and its financial position, in accordance with the accounting policies and principles presented in Notes 2 and 3.

These consolidated financial statements and related notes were prepared in accordance with the accoun-ting principles and policies established and appro-ved by the Board of Directors in the Accounting Policies Manual of Sonangol (Manual de Políticas Contabilísticas da Sonangol) and which take by re-ference the National Accounting Standards and the International Financial Reporting Standards (IFRS) in force. These principles are fully explained throu-ghout Notes 2 and 3 of these financial statements.

For the preparation of these financial statements, the Sonangol Group followed the historical cost principle, except for Note 2.3. q), under which the assets were recognised by the amount of cash or cash equivalents paid or payable, at the exchange rate for the presentation currency, at acquisition date, and the liabilities were recognised by the amount of products and services received in exchan-ge for the present obligation or the amount of cash payable, at the exchange rate for the presentation currency, at transaction date.

The carrying amounts of monetary items nomina-ted in foreign currencies (against the presentation currency) are updated using the exchange rate at reporting date, based on the reference exchange rates published by the National Bank of Angola (Banco Nacional de Angola) at that date. As at 31 December 2017, the last sale rate published by the National Bank of Angola was considered.The car-rying amounts of non-monetary items recorded at historical cost and nominated in foreign currencies (against the presentation currency) are translated at the exchange rate of the transaction date and are not updated at each reporting date. Favourable and unfavourable exchange rate differences are recog-nised in the Income Statement, under Financial income or Financial expenses, respectively, either these are favourable or unfavourable to the Group. Non-monetary assets and liabilities expressed in fo-reign currency recorded at fair value are translated

2 ACCOUNTING POLICIES USED IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

2.1. BASIS OF PREPARATION AND PRESENTATION OF THE FINANCIAL STATEMENTS

2.1.1. BASIS OF PREPARATION AND ACCOUNTING FRAMEWORK USED

at the exchange rate prevailing on the date the fair value was determined.

The financial statements were prepared in accor-dance with the characteristics of relevance and reliability and were prepared on a going concern and accrual basis assumptions in compliance with the accounting principles of consistency, materiality and comparability.


94 95

The Group’s consolidated financial statements and related Notes are presented in Kwanzas, in accordance with the classification, format and order outlined in the General Accounting Plan (Plano Geral de Contabilidade or PGC), adjusted by the introduction of specific items relating to the Group’s core activity (oil and gas industry). Notes not mentioned are not applicable to the Sonangol Group, either for not being relevant, or as a result of the adopted accounting policies.

The Group has also considered the extent to which the currency of the financial statements of the entities included in the consolidation perimeter, differs from that used by Sonangol Group.

For entities that present their financial statements in a currency other than Kwanza, the Sonangol Group has translated those financial statements into the presentation currency of the Group, using the exchange rates of the National Bank of Angola as follows: (i) assets and liabilities were translated at the exchange rate in force at the reporting date; (ii) income and expenses were translated at the average exchange rate of the year and; (iii) equity was translated at the historical exchange rate. The resulting exchange differences are recognised in Equity under the caption Foreign exchange adjust-ments (financial statement conversion).

The exchange rates used to translate the balances presented in a currency other than Kwanza were as follows:

The elements included in these financial sta-tements are, as a whole, comparable with the previous period, except for:

• Note 2.1.4, regarding changes in the consoli-dation perimeter in 2017;

• Note 4B and 13, regarding the change in the accounting policy related to the recognition of reversible assets of the oil concessions;

• Note 17,13 and28, regarding the recognition of liabilities for past services with post-employ-ment benefits of Sonangol Health Plan, whose initialy liability as at 1 January 2017 was recor-ded against Retained Earnings;

• Note 4 and 13, regarding the change in the calculation approach for capitalisable interest incurred with the financing of qualifying assets.

• Note 13, regarding the reversal in 2017 of the criteria applied in 2016 for reclassification of the potential exchange rate differences incur-red in 2016 by the parent company with loans obtained for the acquisition of share capital in subsidiaries for conversion reserves;

• Note 4A and 13, regarding the correction of impairment loss recognised in 2016 on mining assets;

• Note 13, regarding the impairment of loans granted by Sonangol to companies in the priva-te business sector of Angola, within the Law on the Promotion of the Angolan Private Busines-ses; and,

• Other situations considered fundamental errors recognised under Other reserves and Retained earnings, as disclosed in Note 13.

2.1.2. BASIS OF PRESENTATION 2.1.3 COMPARABILITY OF THE FINANCIAL STATEMENTS

Closing Exchange Rate 2017 20161 USD = 166,749 166,728 AOA

1 EURO = 186,303 186,282 AOA

1 GBP = 225,561 203,958 AOA

1 ZAR = 13,458 12,223 AOA

Average Exchange Rate 2017 20161 USD = 166,742 164,021 AOA

1 EURO = 186,296 182,942 AOA

1 GBP = 216,469 221,009 AOA

1 ZAR = 12,624 11,605 AOA

The Sonangol Group has prepared its consoli-dated financial statements, for the first time, in 2013. The definition of the consolidation peri-meter, of the entities to be included or excluded and the consolidation method to be applied, was defined by the Board of Directors for the purpose of providing the relevant information required by the Shareholder, the relevant authority and the financing entities of Sonangol Group, as well as to provide accurate information for the purpose to which these financial statements were pre-pared. The exclusion criteria from full consoli-dation were the immateriality of the subsidiary, the absence of financial information prepared in a timely manner and the existence of severe and long-term restrictions which, in accordance with the Board of Directors, substantially damage the control exercised by the Sonangol Group of its rights over the assets or the management of the subsidiary.

In the consolidation process, the following proce-dures were followed:

• Standardisation of accounting policies and conversion of the financial statements, when the accounting policies followed and the cur-rency of presentation differ from those used by the parent company;

• Sum of the financial statements of the subsi-diaries included in the consolidation by the full consolidation method;

• Write-off of the financial investments held in the subsidiaries against related equity;

• Adjustments related with the use of the ac-quisition method – calculation of goodwill and of the non-controlling interests;

• Elimination of intra group balances and tran-sactions;

• Other necessary consolidation adjustments.

The entities integrating the Group, the percenta-ge of shares held and the nature of the financial investment (subsidiary, joint arrangements, asso-ciate, other) are disclosed in Note 3 for subsidia-

2.1.4 CONSOLIDATION PERIMETERries consolidated by the full consolidation method and Note 6 for other entities.In comparison with the perimeter that was the basis for the preparation of the consolidated fi-nancial statements of 2016, the following chan-ges have occurred:

• Exclusion: Sonils – Sonangol Integrated Lo-gistic Services, Lda;

• Exclusion: Inloc Limited;

• Inclusion: Sonangol Maiombe Limited;

• Inclusion: Sonangol Cazenga Limited.

By decision of the Board of Directors, Sonils and Inloc were not included in the perimeter, as these did not comply with the criteria referenced above.The impact on the closing balances of the diffe-rent balance sheet items due to the exclusion of Sonils and Inloc in 2017 from the consolidation perimeter is presented below:

Amounts in AOA thousand

Description Sonils InlocAssets (A) 116.128.365.621 14.912.888.758

Equity (E) 72.357.981.360 14.386.353.397

Liabilities (L) 43.770.384.261 526.535.361

A-(L+E) - -


96 97

The exclusion of these companies from the con-solidation perimeter resulted in a reduction of the Group’s goodwill in the amount of AOA 27,768,098 thousand, as disclosed in Note 5 and a reduction in the consolidated equity in the amount of AOA 86,721,468 thousand, as disclosed in Note 13.

In 2017, the construction of the two Suezmax ships that had been under construction since 2014 was completed and whose assets were re-corded in the financial statements of Sonangol EP as assets under construction. For the operation of these ships, the subsidiaries Sonangol Cazen-ga Limited and Sonangol Maiombe Limited were incorporated and included in the consolidation perimeter, receiving by transfer these two ships.

The value of the different balance sheet items of these new companies is shown below:

Amounts in AOA thousand

Description Sonangol Maiombe Limited

Sonangol Cazenga Limited

Assets (A) 11.722.611.554 11.724.440.614

Equity (E) 11.367.270.826 11.408.605.735

Liabilities (L) 355.340.728 315.834.879

A-(L+E) - -

The preparation of the Consolidated Financial Statements requires judgments, estimates and assumptions that affect the amount of income, expenses, assets and liabilities, and related disclosures, and the disclosure of contingent liabilities at the date of the consolidated financial statements.

Estimates and judgments are reviewed on an ongoing basis and based on Management expe-rience and other factors, including expectations of future events that are believed to be reasonable according to the circumstances. However, uncer-tainty related to assumptions used and the esti-mates made, may lead to conclusions that require material adjustments to book values of assets and liabilities in future periods.

In particular, the Group has identified the following areas where significant judgements, estimates and assumptions are required. Additio-nal information on each of these areas and how these impact the various accounting policies are described below and also in the relevant notes to the financial statements.

Changes in estimates are treated prospectively.

(i) Joint arrangements The Board of Directors exercises judgment to de-termine when the Group has joint control over an arrangement, which requires an assessment of the relevant activities and when decisions relating to tho-se activities require unanimous consent. The Group has determined that the relevant activities for its joint arrangements are those relating to the operations and equity decisions, such as the approval of the an-nual investment program and to nominate, remune-rate and destitute the personnel responsible for the management or suppliers of the joint arrangement. See Note 2.3.b) for further details. Judgment is also required to classify a joint arrange-ment. Classifying the joint arrangement requires the

2.2 JUDGMENTS, ESTIMATES AND SIGNIFICANT ASSUMPTIONS USED

2.2.1 JUDGEMENTS

The key assumptions concerning the future and other key sources of uncertainty in estimates calculated at the reporting date that have a significant risk of cau-sing a material adjustment to the carrying amounts of assets and liabilities during the subsequent period, are described below. The Group supports its as-sumptions and estimates based on parameters and information available when the consolidated financial statements are prepared. Circumstances and as-sumptions about future developments, however, may change due to market changes or circumstances ari-sing beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

(i) Hydrocarbon reservesThe estimation of crude oil reserves are an integral part of the decision-making process relating to the assets of upstream activities, in addition to suppor-ting the development or implementation of assisted recovery techniques (secondary and tertiary).

The volumes of proven crude oil reserves that the Company uses for the preparation of financial statements arise from external independent expert reports. This information is updated annually and is used to calculate the depreciation of assets relating to the oil and gas production activity according to the unit of production method as well as for the annual recognition of decommissioning costs of the blo-cks. For evaluation of impairment of investments in assets relating to upstream activity (see Note 2.2.2 v)), the Group uses sources of information certified by independent entities considering proven and probable reserves as well as the future investment to be made to access these reserves.

The estimate of reserves is subject to future re-visions, based on new information available, for example, for development activities (drilling and production), prices, contract termination dates or de-velopment plans (sanctioning development projects), the arrival of new technologies, etc.

The impact on depreciation and provisions for dis-mantling resulting from changes in estimated reser-ves is treated prospectively, written-off the remaining net value of assets and increasing the provision for decommissioning costs, respectively, according to the expected future production.

2.2.2 ESTIMATES AND SIGNIFICANT ASSUMPTIONS

Board of Directors to assess their rights and obliga-tions arising from the arrangement. In particular, the Board of Directors considers:

• The structure of the joint arrangement – whe-ther it is structured through a separate vehicle;

• When the arrangement is structured through a separate vehicle, the Board of Directors also considers the rights and obligations arising from:

- The legal form of the separate vehicle; - The terms of the contractual arrangement; - Other facts and circumstances (where rele-

vant).

This assessment often requires significant judgment and may affect significantly the accounting treatment.

Investments in associates and joint arrangements are measured at cost less impairment losses.

(ii) Contingencies By their nature, contingencies are resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential amount of contingencies inherently involves the exer-cise of significant judgment and the use of estimates regarding the outcome of future events.

The final cost of legal proceedings, settlements and other litigation may vary due to estimates based on different interpretations of the standards, opinions and final assessments of the amount of losses. The-refore, changes in circumstances related to contin-gencies may have a significant impact on the amount of provision for contingencies recorded.


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(ii) Exploration and evaluation expendituresThe application of the Group’s accounting policy for exploration and evaluation expenditure requires judgment to determine whether future economic benefits are likely to flow, from either future use or sale, or whether activities have not reached a stage which permits a reasonable assessment of the exis-tence of reserves. The determination of reserves and resources is itself an estimation process that involves several degrees of uncertainty depending on how the resources are classified. The capitalisation policy requires management to make certain estimates and assumptions about future events and circumstances, in particular, whether an economically viable extrac-tion operation can be established. Such estimates and assumptions may change as new information becomes available. If, after expenditure is capitali-sed, information made available suggesting that the recovery of the expenditure is no longer probable, an impairment loss is recognised in the Income State-ment of the amounts previously capitalised.

(iii) Depreciation of Oil and Gas assets – Units of production method Oil and gas assets are depreciated according to the units of production method (UOP) method over total proven developed hydrocarbon reserves. This results in a depreciation charge proportional to the depletion of the remaining production from the field. The useful life of each asset, which is assessed at least on an annual basis, considers both its physical life limita-tions and current assessments of economically re-coverable reserves from the field on which the asset is located. The calculation of the depreciation ratio using the UOP is impacted by changes in the estima-ted future reserves. Changes in proven reserves may occur due to changes in assumptions used in reserve estimates, namely estimated future prices.

(iv) Useful lives and residual values of tangible fixed assetsThe calculation of the assets’ residual values and useful lives and the depreciation/amortisation method to be applied is crucial to determine the amount of depre-ciation and amortization to be recognised in the conso-lidated income statement for each period. These two parameters are defined according to the best judgment of the Board of Directors for the concerned assets.

(v) Recoverability of oil and gas assetsThe Group assesses its asset or cash-generating unit at each reporting period to determine whether any sign of

impairment exists. For the specific situation of goodwill, this is assessed annually for impairment at each repor-ting date. Whenever an impairment sign is identified, an estimate of the recoverable amount is made, which is considered to be the higher of fair value less costs to sell and value in use.

In determining the recoverable amount of an asset, and particularly the fair value less costs to sell, in situations where there were no recent market transactions, the Group used discounted cash flow techniques, and the assumptions were adjusted based on the assumptions that market participants would use to evaluate the asset, cash-generating unit or a group of cash-generating uni-ts. According to this approach, cash flows and discount rates are considered after taxes.

Oil and gas propertiesThe recoverable amount of oil and gas properties was determined in accordance with the best estimate of the Group’s Board of Directors, based on its value in use, corresponding to the discounted value of the estimated cash flows for the exploration period of the blocks / fields considering the following assumptions:

• Proven and probable reserves (2P reserves) certified by external independente experts;

• Oil and natural gas price curve and price differentials for each oil sector ($62.26/barrel in 2018, $62.65/barrel in 2019, $65/barrel in 2020 and a 2% growth in the following years);

• Discount rates between 11% and 12%;

• Operating costs (production cost per barrel);

• Future capital expenditures (capex);

• Dismantling costs (based on up-to-date infor-mation from operators);

• Working interest and net entitlement rate.

Impairment tests are performed in USD and sub-sequently translated to AOA at the exchange rate at reporting date.

The oil and gas properties tested are disclosed in Note 4.A. Oil and gas properties, net of any impair-ment loss recognised in the period and in previous periods.

Exploration and evaluation assetsThe Group uses the successful effort method for the capitalisation of its exploration and evaluation assets, i.e., expenditures incurred are capitalised to the extent that will result in the discovery of hydrocarbon resources with technical, economic and commercial viability and the outcome of the evaluation activities, such as additio-nal well drilling or delineation wells would result to be positive and favourable to the extraction of the discove-red hydrocarbons.

When determining the recoverable amount of explo-ration and evaluation assets, the Group’s Board of Directors has used its best estimate to determine if the expected future economic benefits with the extraction of the hydrocarbons are higher than the investment performed, having considered for the effect the probable reserves in the testing areas.

This analysis was performed in USD and subsequently translated to AOA at the exchange rate at reporting date.The exploration and evaluation assets that were tested are disclosed in Note 5.A. Exploration and evaluation as-sets, net of any impairment loss calculated in the period and in previous periods.

Real EstateThe Group has several real estate properties (lands, buildings or part of buildings) held for capital appre-ciation to obtain income.

In determining the recoverable amount, the Group’s Board of Directors has considered the amounts de-termined according to the income approach method by external experts, considering the best use that the market would give to the asset.

The real estate that were tested are disclosed in Note 7 Other financial assets – investment in real estate properties, net of any impairment loss recognised in the period. Goodwill Sonangol Group has goodwill related to the acqui-sition of Luanda’s Refinery to theFina Petróleos corresponding to an independent cash generating unit (CGU). The recoverable amount of goodwill was determined in accordance with the best estimate of the Group’s Board of Directors, based on cash flows projections for periods of five years and a perpetuity without

growth rate and being considered assumptions re-garding the oil and natural gas prices curves (con-sidering current and historical prices, price trends and related factors), discount rates, operating costs, including downtime costs (where applicable), future capital requirements and operating performance.

For impairment tests, the Group has considered a nominal discount rate in AOA of about 14% for Luan-da’s Refinery (projections developed in AOA).Goodwill is disclosed in Note 5 Other intangible asse-ts, net of impairment losses.

Financial investment in Angola LNGThe recoverable amount of the financial investment held in Angola LNG was determined in accordance with the best estimate of the Group’s Board of Direc-tors, based on value in use, which was determined based on the cash flows of the business, the natural gas prices curve (considering current and historical prices, price trends and related factors), discount ra-tes, operating costs estimate, future capital require-ments and operating performance (including produc-tion volumes and sales).

For impairment tests, which were performed in USD and subsequently translated to AOA at the exchange rate at reporting date, the Group considered a nomi-nal discount rate of about 10% and the best estimate of the natural gas prices curve.

Financial investment held in Angola LNG is disclosed in Note 6.2.1 Financial investment in Angola LNG, at acquisition cost net of impairment losses.

Estimates and assumptions related with the recove-rability of the assets “Oil and gas properties”, “Explo-ration and evaluation assets”, “Real estate proper-ties” and “Goodwill” and other assets are subject to risk and uncertainty, therefore there is a possibility that changes in circumstances as well as in internal and external environment may impact these projec-tions, which may affect the recoverable amount of assets and/or cash-generating units.

(vi) Decomissioning costsDecommissioning costs will be incurred by the Group at the end of the operating life of some of the Group’s facilities and properties. The Group assesses its decommissioning provision at each reporting date, the extension of the evaluation depends of significant changes in key assumptions and market information.


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The ultimate decommissioning costs are uncertain and cost estimates can change in response to many factors, including changes to relevant legal requi-rements and development of new environmental restoration techniques. The expected timing, extent and amount of expenditure may also change — for example, in response to changes in reserves or chan-ges in laws and regulations or their interpretation. Consequently, there could be significant adjustments to current provisions, which may impact the Group’s future operating and non-operating results. External or internal experts may be used to assist with the assessment of future decommissioning costs. The involvement of independent experts is determined on a case-by-case basis, considering factors such as the expected total cost or timing of decommissioning, and is approved by the Company’s Board of Directors. Selection criteria includes market knowledge, reputation and independence.

The decommissioning provision at the reporting date represents the best estimate of the Board of Direc-tors on the present value of the future decommissio-ning costs obligation.

(vii) Pension post-employment benefitsDetermining pension and other employee benefits liabilities requires the use of assumptions and esti-mates, including actuarial assumptions and projec-tions, discount rates and pension and salary growth rates, estimated costs with future medical care and other factors that can impact the cost and liability of pension plans, medical plans and other benefits. Changes to these assumptions could materially affect the amounts determined.

Employee benefits at the reporting date represent the Board of Director’s best estimate of the present value of the obligation.

(viii) Impairment of accounts receivableImpairment losses relating to doubtful debts are estimated by Sonangol based on the estimated recoverable amounts, the date of default, debt write offs and other factors. Certain circumstances and facts may change the estimated impairment losses of doubtful debts, namely changes in the economic environment, economic sector trends, increases in the main client’s credit risk and significant defaults. Changes to these estimates could affect the deter-mination of different levels of impairment, thereby affecting results.

(a) Investments in subsidiaries and associatesThe consolidated financial statements of Sociedade Nacional de Combustíveis de Angola – Empresa Pública (Sonangol E.P.) for the year ended 31 December 2017, comprise the financial statements of the parent com-pany (Sonangol E.P.) and of the subsidiaries mentioned in Note 3, following the criteria set out in Note 2.1.4.

Subsidiaries are those entities (including structured entities) over which the Group exercises control and for which the exclusions mentioned in Note 2.1.4 are not applicable. The Group considers that controls an entity when it is exposed, or has rights, to variable returns resulting from its involvement with the investee and has the potential to affect those same returns through its power over the investee. In particular, the Group controls an investee if, and only if, the Group presents:

• Power over the investee (e.g., existing rights that allow to direct the relevant activities of the investee);

• Exposure or rights, to variable returns resulting from its involvement with the investee;

• The ability to use its power over the investee to affect its returns.

When the Group has less than the majority of votes, or similar, rights over an investee, it considers all relevant facts and circumstances when considering whether it has control over an investee, including:

• Contracted agreements with other shareholders of the investee;

• Rights arising from other contracted agreements;

• Voting rights and potential voting rights of the Group.

The entities that are subsidiaries and form are part of the consolidation perimeter defined by the Board of Di-rectors of Sonangol, are consolidated by the full consoli-dation method and are listed in Note 3.

The Financial Statements of subsidiaries are prepared at the same reporting date, using consistent accounting policies between the subsidiaries and the Group.

2.3 BASIS OF VALUATION ADOPTED IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

When necessary, adjustments are made to the financial statements of subsidiaries to ensure that these accoun-ting policies are consistent with the Group’s accounting policies. All balances and transactions between Group companies are totally eliminated in the consolidation process.

A change in the ownership percentage of a subsidiary that does not result in a loss of control is treated as an equity transaction. When the Group loses control over a subsidiary, the Group proceeds as follows:

• Assets (including Goodwill) and liabilities of this subsidiary are derecognised;

• Non-controlling interests are derecognised;

• Accumulated translation adjustments are dere-cognised;

• Fair value of the consideration received is recog-nised;

• Fair value of the share capital retained is recog-nised;

• Any difference in current year income and equity is recognised; and

• Reclassification of the Group’s components for-merly recognised in equity into income, expenses or retained earnings as appropriate, as if it would be recognised if the Group had sold the related assets and liabilities.

(b) Investments in joint agreementsA joint arrangement is an economic activity undertaken by two or more parties, subject to joint control through a contractual arrangement. Joint control is the con-tractually agreed sharing of control of an arrangement, whereby the Strategic, Finance and Operating decisions of the business activity requires unanimous consent of the parties sharing control.

i) Joint operations Joint operations are a type of joint arrangement whereby the parties that have joint control of an economic activity have rights to the assets and obligations for the liabili-ties, relating to the arrangement.


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In relation to its interests in joint operations, the Group recognises its:

• Assets, including its share of any assets held jointly;

• Liabilities, including its share of any liabilities incur-red jointly;

• Revenue from the sale of its share of the output arising from the joint operation;

• Share of the revenue from the sale of the output generated by the joint operation;

• Expenses, including its share of any expenses incurred jointly.

ii) Joint venturesJoint ventures are a type of joint arrangement whe-reby the parties that have joint control of the arran-gement have rights to the net assets (equity) of the joint arrangement. The Group’s investments in its joint venture are recorded at its acquisition cost less impairment losses, and are disclosed in Note 6.1.

(c) Other financial investmentsExcept for financial investments measured at fair value (see Note 2.3 q), 6.3 and 7) the remaining financial investments (i.e. equity instruments in third party entities) are measured at acquisition cost net of impairment losses (where applicable), and are disclosed in Note 6.2.

(d) Business combinations and GoodwillBusiness combinations are accounted for by applying the acquisition method. The cost of an acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at acquisition date. The identifiable assets acquired and liabilities and contingent liabilities as-sumed in a business combination are initially mea-sured at fair value at acquisition date, regardless if there are any non-controlling interests. The excess of the acquisition cost over the fair value of the interest held in the identifiable net assets is recognised as goodwill.

Acquisition related costs are expensed as incurred.

If fair value of net assets acquired is greater than the aggregate consideration transferred, before recog-nising a gain, the Group reassesses whether it has

correctly identified all of the assets acquired and all the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at acquisition date. If the assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in the income statement.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s Cash Generating Unit´s that are expected to benefit from the business combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

(e) Exploration and evaluation expenditure Exploration and evaluation expenditure are accounted for using the successful efforts accounting policy, which is detailed in Notes 5A and 27A.

i) Pre-license costsPre-license costs are recognised in the income state-ment in the period in which they are incurred.

ii) License and property acquisition costsExploration license and leasehold property acquisi-tion costs are capitalised in intangible assets under “Exploration and evaluation assets” and are amorti-sed over the period covered by the license.

License and property acquisition costs are reviewed at each reporting date to confirm that there is no indication that the carrying amount exceeds the recoverable amount. This review includes confirming that exploration drilling is still in progress or firmly planned, or that it has been determined, or work is already in progress to determine that the discovery is economically viable based on a range of technical and commercial considerations and that sufficient progress is being made on establishing development plans.

Rights and licenses are amortised using the produc-tion unit method on the total developed and undeve-loped proven reserves of the concerned area.

If no future activity is planned or the license has been abandoned, canceled or has expired, the carrying amount of the license and property acquisition costs are written-off through the Income Statement.

Upon recognition of proven reserves and internal approval for its development has been obtained, the relevant expenditure is transferred to Oil and gas properties.

iii) Exploration and evaluation costsExploration and evaluation activity involves the search for hydrocarbon resources, the determination of te-chnical feasibility and the assessment of commercial viability of identified resources.

Geology and geophysical costs are recognised in the Income statement as incurred.

Once the legal right to explore has been acquired, costs directly associated with exploration wells are capitalised as exploration and evaluation intangible assets until the drilling of the well is complete and the results have been evaluated. These costs include directly attributable employee remuneration, mate-rials and fuel used, rig costs and payments made to contractors.

If no potentially commercial hydrocarbons are disco-vered, exploration assets are recognised in the Inco-me Statement as a dry well (non-operating costs). If extractable hydrocarbons are found and, subject to further appraisal activity (e.g., the drilling of additio-nal wells), it is probable that they can be commer-cially developed, the costs continue to be carried as an intangible asset while sufficient/continued pro-gress is made in assessing the size, characteristics and commercial potential of a reservoir following the initial discovery of hydrocarbons, including the costs of appraisal wells where hydrocarbons have not yet been found.

Such capitalised costs are subject to technical, com-mercial and management review, as well as review for indicators of impairment at least once a year. This is to confirm the continued intention to develop or otherwise extract value from the discovery. When this is no longer the case, the costs are recognised in the Income Statement.

When proven reserves of oil and natural gas are identified and development is approved, the rele-vant capitalised expenditure are first assessed for impairment signs and (if required) any impairment loss is recognised in the Income statement and the remaining balance is transferred to Oil and gas pro-perties. Other than license costs, amortised over the

licence period, no amortisation is charged during the exploration and development phase. iv) Development costsExpenditure incurred with the construction, installation or completion of infrastructure facilities such as plat-forms, pipelines and drilling of development wells are capitalised within oil and gas properties as disclosed in Note 2.3 e).

(f) Oil and gas properties and other tangible fixed assets The Group considers as oil and gas properties, those property, plant and equipment items directly related with oil and gas fields / blocks. These assets are disclosed separately on the face of the balance sheet under the caption Oil and gas properties.

i) Initial recognitionOil and gas properties and other tangible fixed assets are initially measured at acquisition cost, less accumula-ted depreciation and accumulated impairment losses (if and where applicable).

The acquisition cost of the asset comprises its acquisi-tion or construction cost, which includes the purchase, transportation, assembly and installation costs and other directly attributable costs to bring the asset into operation and the Group’s initial estimate for the de-commissioning and removal obligation. As for qualifying assets, i.e., an asset that takes a substantial period of time to get ready for its intended use or sale (above 12 months), it also includes the associated borrowing costs.

Specifically, for oil and gas properties, when a develop-ment project moves into the production stage, the ca-pitalisation of certain construction / development costs ceases, and costs are either regarded as part of the cost of inventories or as expenses, except for costs which qualify for capitalisation relating to oil and gas property asset additions, improvements or new developments.

ii) Capitalisation of borrowing costs and other di-rectly attributable costsInterest on loans attributable to the acquisition or construction of assets is capitalised as part of the cost of these assets. An asset eligible for capitalisation is an asset that requires a substantial period of time to be available for sale or use. The amount of interest to be capitalised is determined by applying a capitalisation rate on the value of the investments made. The capitali-sation rate corresponds to the weighted average interest


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rate on loans outstanding in the period. The capitalisa-tion of borrowing costs begins when expenditures for the assets are being incurred, borrowing costs have been incurred and activities necessary to prepare all or part of the assets for their intended use or sale are in progress. Capitalisation ceases when all activities necessary to place the asset as available for sale or use are substan-tially completed.

The Group suspends the capitalisation of borrowing costs during extended periods when the development of a qualifying asset is suspended or when there are facts and circumstances showing that the carrying amount exceeds the recoverable amount.

iii) AmortisationAmortisations of oil and gas properties and other tangib-le fixed assets, begins when the asset has the conditions to be used, i.e., when it is located and in the necessary conditions for its intended use, and cease when the future economic benefits incorporated are extinct either for impairment or derecognition.

Oil and gas propertiesOil and gas properties are amortised on a unit-of-pro-duction basis, determined in accordance with the ratio between the hydrocarbons production volume in each period and the total proven developed hydrocarbons reserves (Reserves 1P).

Other tangible fixed assetsOther property, plant and equipment are generally depreciated on a straight-line basis over their estimated useful lives on a duodecimal basis. The main deprecia-tion rates correspond to the following estimated useful life (except for refineries which is generally fifteen years and major inspection costs which are depreciated over three to five years, which represents the estimated pe-riod before the next planned major inspection):

The asset’s residual values, useful lives and methods of amortisation are reviewed at each reporting period and adjusted prospectively, if appropriate.

iv) Derecognition

Oil and gas propertiesIn accounting for farm-out arrangements outside the exploration phase, the Group:

• Derecognises the proportion of the asset sold;

• Recognises a gain or loss on the transaction for the difference between the fair value of the farm out and its carrying amount. A gain is only recog-nised when the value of the consideration can be determined reliably. Otherwise, the Group recog-nises the consideration received as a reduction in the carrying amount of the underlying asset.

• Impairment tests are carried out to retained amounts if the terms of the arrangement indicate that retained interests may be impaired

Other tangible assetsAn item of tangible fixed assets is derecognised upon abandonment or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the recoverable amount and its carrying amount) is included in the Income Statement when the asset is derecognised.

v) Major maintenance, inspections and repairsExpenditure on major maintenance, inspections or repairs comprise the cost of replacement assets or parts of assets. When an asset, or part of an asset that was separately depreciated is replaced and it is probable that future economic benefits associated with the new item will flow to the Group, the replace-ment cost is capitalised.

When part of the asset replaced was not separately considered as a component and therefore not depre-ciated separately, the replacement value is used to estimate the carrying amount of the replaced asset(s) and is immediately written off.

Inspection costs associated with major maintenan-ce programs are capitalised and amortised over the period until the next inspection. All other day-to-day re-pairs and maintenance costs are expensed as incurred.

Class of the Assets YearsBuildings and other constructions 50

Basic equipment:

- Constructions, equipment 15 – 18

- Others 6 – 10

Transport equipment 4 – 5

Informatic equipment 3 – 7

Administrative equipment 3 – 7

(g) Reversible assetsUnder the contracts signed between Sonangol EP, as National Concessionaire of the rights to explo-re, develop and produce liquid and gaseous hydro-carbons, with the Contractor Groups that operate oil blocks, there are several assets acquired by these Contactor Groups that, at the end of the concession arrangements, will return to Sonangol EP, known as reversible assets.

Reversible assets correspond to assets that are deducted from the oil-profit concept of oil and gas operations, and as such are deducted from the contributions made by the Contractor Groups to the National Concessionaire. Sonangol EP recog-nises these assets as tangible fixed assets when the risks and rewards of the assets are substan-tially transferred to Sonangol EP. These transfers normally take place at the end of the contract with the Contractor Group, which is why these assets are not recorded in the consolidated financial sta-tements of Sonangol EP. When this transfer takes place, the assets are initially measured at fair value, recorded under Property plant and equip-ment and amortised prospectively in accordance with the remaining useful life.

(h) Intangible assets Intangible assets acquired separately are measu-red at initial acquisition cost. The cost of intangi-ble assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets with definite useful lives are carried at cost less any accumu-lated amortisation (calculated on a straight-line basis over their useful life) and accumulated impairment losses, if any. Intangible assets with indefinite useful life (e.g. Goodwill) are not amorti-sed, instead these are tested for impairment on an annual basis, at the reporting date.

Intangible assets with finite useful life are amor-tised over their economic life and assessed for impairment whenever there is a sign that the in-tangible asset may be impaired. The amortisation period and the amortisation method for an intan-gible asset with a finite useful life is reviewed, at least, at the end of each reporting period. Changes in the expected useful life or consumption pattern of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as

changes in accounting estimates. The amortisa-tion expense on intangible assets with finite useful life is recognised in the Income Statement under the caption Amortisations.Gains or losses arising from the derecognition of an intangible asset are measured as the difference between the recoverable value and the carrying amount of the asset and are recognised in the In-come Statement when the asset is derecognised.

(i) Impairment of assets

i) Non-financial assets (excluding goodwill)The Group assesses at each reporting date whe-ther there is a sign that an asset (or cash-gene-rating units) may be impaired. For the oil and gas properties, the Board has assessed its cash-gene-rating units as being an individual field or block, which is the lowest level for which cash flows are largely independent of other assets.

Wherever there is any sign of impairment or if it is the Group’s policy to perform an annual impair-ment test, the Group estimates the recoverable amount of the cash-generating unit or of the as-set. The recoverable amount of a cash-generating unit or of an asset is the higher of the fair value less costs to sell and value in use. The recoverable amount is determined for an individual asset, un-less the asset does not generate cash inflows that are largely independent of other assets or groups of assets, in which case the asset is tested as part of a larger cash-generating unit where it belongs. When the carrying amount of an asset or cash-ge-nerating unit exceeds its recoverable amount, the asset or the cash-generating unit is considered impaired and is written down to its recoverable amount.

The calculation of fair value less costs to sell may be based: i) on the sales price contractually agreed in a transaction between non-related parties less costs to sell it; ii) the market price if the asset is traded on an active market; or (iii) the fair value calculated as an estimate of the future cash flows that any market player would expect to obtain from the asset. In accordance with the methodology in iii), cash flows and discount rates are consider after-taxes.


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In calculating the value in use, the methodology of the discounted cash flows is used, and includes the following elements:

• an estimate of the future cash flows that the entity expects to obtain with the asset;

• the expectations of variations and timing of the expected future cash flows;• the use of a pre-tax discount rate associated to the weighted average cost of capital; and

• other factors that should be considered in this analysis, such as the lack of liquidity that the market participants might reflect in the future cash flows that the entity expects to obtain from the asset.

The value in use does not reflect future cash flows associated with the restructuring and improve-ment or enhancing of operating performance of the asset. Instead, for the calculation of fair value less costs to sell, the discounted cash flows model includes the cash flows associated with the costs with restructuring and improvement when it cor-responds to a market expectation.

The Group bases its impairment calculation on de-tailed budgets and forecasts, which are prepared separately for each cash-generating unit to which the individual assets are allocated. These budge-ts and forecasts generally cover the period of six years. For longer periods, a long-term growth rate is calculated and applied to project future cash flow after the sixth year.

Impairment losses on continuing operations, in-cluding impairment of inventories, are recognised in the Income Statement in those expense cate-gories consistent with the function/nature of the impaired asset.

For assets/ cash-generating units, excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating units’ recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s/ cash-generating

units’ recoverable amount since the last impair-ment loss recognised. The reversal is limited up to the limit where the carrying amount of the asset/ cash-generating units does not exceed either its recoverable amount, or the carrying amount that would have been determined, net of depreciation/amortisation, had no impairment loss been recog-nised for the asset/ cash-generating units in prior years. Such reversal is recognised in the Income Statement.

When an impairment loss or its reversal is recog-nised, the amortisation of the related assets is recalculated prospectively in accordance with the recoverable amount adjusted by the impairment loss recognised.

ii) GoodwillGoodwill is tested for impairment on an annual basis at each reporting date or whenever circums-tances indicate that the carrying amount may be impaired.

Impairment is determined for Goodwill by asses-sing the recoverable amount of each cash-gene-rating unit (or group of cash-generating units) to which the Goodwill relates. When the recoverable amount of the cash-generating unit is less than its carrying amount, an impairment loss is recogni-sed. Impairment losses relating to goodwill cannot be reversed in future periods.

iii) Financial investments and investments in Real EstateThe Group has financial investments and invest-ments in real estate (recorded in other financial assets) measured at cost less impairment losses and financial investments in other financial assets measured at fair value through profit and loss. For financial investments and investments in real es-tate measured at cost, impairment is determined based on rules calculation methodologies similar to the ones used for non-financial assets.For financial investments and other financial as-sets measured at fair value through profit and loss the calculation is based on the quotation reported by independent experts. For listed assets market information is used.

Financial instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a finan-

cial liability or equity instrument of another entity, and is recognised initially at the transaction cost, when the Group becomes part of the correspon-ding contractual arrangements.

(j) Financial assetsThe Group’s financial assets include accounts receivable (trade and others), other current and non-current assets, other non-current financial assets and cash and cash equivalents. The pur-chases and sales of financial assets that demand delivery of goods within a certain agreed timefra-me are recognised on the date in which the Group commits to purchase or sell the good.

Accounts receivable and other current and non-current assetsThis is the most significant category for the Group. Accounts receivable, other current and non-cur-rent assets are non-derivative financial assets with fixed or determined payments that are not quoted in an active market. After initial recogni-tion, such financial assets are recorded at nomi-nal value less any impairment loss, necessary to reflect their expected net realisable value. Losses are registered in the Income Statement when the-re is objective evidence that the total or part of the debt, according with the original conditions of the account receivables, will not be received.

For the oil and gas activities, whenever the Group has performed “lifts” below or above its rights cal-culated in accordance with the production sharing agreements (PSA), it is considered that there is Underlifting or Overlifting, respectively, and the amounts are measured at its sale price and regis-tered as an account receivable or payable, against profit and loss.

Other non-current financial assets

Financial investments in Real EstateThe Group has several real estate properties classified as financial investments in real estate. These investments in real estate are initially recor-ded at acquisition or construction cost, including non-deductible taxes (e.g. SISA), installation and assembly costs, other directly attributable costs to bring the asset in the location and condition necessary to operate as intended, the estimated costs of dismantling, removing or restoring items

(where applicable) and related borrowing costs of qualifying assets, net of impairment losses to ensure that the asset does not exceed its realisa-ble value.

Investment fundsThe Group owns participation units in invest-ment funds. These financial investments held by Sonangol are measured at cost, which includes its purchase price, the charges related with the acquisition, such as brokerage commissions, fees and expenses and bank charges. Subsequently, these financial investments are measured at fair value, calculated based on the final report of the fund managers, against financial results.

Bank depositsThe Group recognises in bank deposits the balan-ces held in Banks (fixed-term deposits or deposits repayable on demand) subject to a reduced risk of changes in value, monetary means in transit and cash surplus applications in financial products (e.g. Angolan Treasury bonds) which are registered in Trading securities.

Under the contracts between Sonangol EP and the Contractor Groups for each block, Sonangol EP is the beneficiary party of the bank deposits with restricted mobilization (escrow accounts) and which are related with the wells´ shutdown, assets dismantling and environment recovery after the exploration of the blocks by each Contractor Group. These deposits are measured at cost.

(k) Financial liabilitiesThe Group’s financial liabilities include accounts payable (suppliers and other accounts payable) and medium and long-term loans. A financial ins-trument is classified as a financial liability when there is a contractual obligation for the issuer to settle capital and / or interest, through the delivery of money or another financial asset, regardless of its legal form.

Accounts payableThe trade suppliers and other current liabilities balances are recorded at their nominal value.

The trade suppliers and other current liabilities balances are, usually, measured at historical cost.


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The historical cost corresponds to the initial amount recorded (nominal amount) eventually ad-justed to reflect (i) accrued interests related with loans that were not paid on settlement date and (ii) unrealised exchange differences determined by the application of the exchange rate at the repor-ting date to the balances in foreign currencies.

Whenever, in exceptional circumstances, the paya-ble amount is below the historical amount, as in the event of a reduction or a debt forgiveness, the nominal amount is reduced, directly, for its reali-sable amount, and an extraordinary gain is recog-nised in the Income Statement.The Group derecognises a financial liability only when the obligation under the liability is dischar-ged, cancelled or expires.

LoansThese captions includes loans obtained from credit institutions and other entities, measured at its nominal amount in its current and non-current portions.

Interest expense is recognised as incurred.

Borrowing costs related to the acquisition, cons-truction or development of a qualifying asset, are capitalised as part of the cost of the related asset. The capitalisation of these costs begins after the preparation of the construction or development of the asset and ceases when the asset is ready for its intended use or when the related project is suspended. Any financial income generated by loans related to the specific investment are deduc-ted to the amount of financial charges eligible to be capitalised.

(l) InventoriesInventories are recorded at the lower of cost and net realisable value.

The acquisition or production cost is determined, in accordance with the nature of the inventories and of the business developed. The Group has recognised the following types of inventories in its consolidated accounts:

a. Raw materials and subsidiary products• Crude oil - The cost of crude oil includes the invoice price, transportation and insurance expenses, for which the costing method is FIFO

(first in first out), applied to a unique family whi-ch includes all types of crude oil.

• Other raw materials (excluding general mate-rials) – The acquisition cost includes the invoice price, transportation and insurance expenses, for which the costing method is FIFO, applied to product families which are created taking into consideration the characteristics of the several raw materials.

• General materials - The acquisition cost includes the invoice price, transportation and insurance expenses, for which the average weighted cost method is used to determine the cost of sales.

b. Products and work in progressThe production cost includes materials, external supplies and services e general expenditures.

c. Finished products and intermediate goods• Crude oil – Relates to crude oil produced in the oil and gas activities and which is in stock as at 31 December each year, in the share part of the total crude oil produced in each develop-ment area.

• Oil by-products – Finished products and in-termediates goods are measured at production cost, which includes the consumables of raw materials and other products, direct labour cos-ts and overheads. In case of products acquired from third parties, these are measured at ac-quisition cost which includes the invoice price, transportation and insurance expenses, using the FIFO applied to product families, which are created considering the characteristics of the materials, as the method used to determine the cost of sales.

• Other finished and intermediates products – The production cost includes raw materials, variable and fixed industrial costs using the weighted average cost the method to determine the cost of sales.

d. GoodsThe acquisition cost includes the invoice price, transportation and insurance expenses, using the weighted average cost method for natural gas (LPG), oil by-products and other goods as the me-thod used to determine the cost of sales.

Since raw materials and subsidiaries and goods in transit are not available to be consumed or sold, these are segregated from the remaining invento-ries and are measured at the specific acquisition cost.

The net realisable value of inventories is based on the estimated sales price on the ordinary course of business, deducted from the estimated costs to finalise the product and the necessary sales costs.

Differences between the acquisition cost and the related net realisable value, if positive, are recor-ded as Non-operating results (see Note 33); any reversal are also recorded under Non-operating results.

The variation of products and work in progress at each reporting date, when compared with the po-sition at the beginning of the period, is recognised as variation in finished products.

The Group recognises as Cost of goods sold and materials consumed, the outflows of inventories under sub-items Goods and raw materials, subsi-diaries and consumable goods.

(m) LeasesThe Group recognises a lease when it is part of a lease contract (until the end of the contract), which is always recognised as operating lease. The Group has, currently, leases as lessor and as lessee, which are recognised and measured as follows:

• Operating leases as a lessee: rents payable are recognised as cost in the consolidated in-come statement in the period to which they are contractually related, by its nominal amount;

• Operating leases as a lessor: rents received are recognised as profit in the Consolidated In-come Statement in the period to which they con-tractually relate (see Note 2.3 j) by its nominal amount. The leased assets are predominantly recognised as Other financial assets – invest-ments in real estate.

(n) Provisions for other risks and chargesProvisions are recognised when there is (i) a legal or constructive obligation as a result of past even-ts; (ii) it is probable that an outflow of resources

will be required to settle the obligation, and (iii) a reliable estimate can be made of the amount of the obligation.

No provision is recognised for future operating losses. Provisions are reviewed at each balance sheet date and are adjusted to reflect the best estimate at that date.

If the time effect of money is material, provisions are discounted to present value using a discount rate (before tax) that reflects, where appropria-te, the specific risks associated with the liability. When discounting is used, the increase in the pro-vision due to the passage of time is recognised as financial expenses. With the exception for decom-missioning provisions, the cost of any provision is disclosed in the Income Statement.

(i) Decommissioning provisionsThe Group recognises a decommissioning provi-sion when it has an obligation (legal or construc-tive) as a result of past events; and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The obligation usually occurs when the asset is installed or when the environment is modified. When the liability is initially recognised, the pre-sent value of the estimated decommissioning total cost is capitalised by increasing the net value of the underlying oil and gas assets.

Changes in time or cost of the estimated decom-missioning are treated prospectively through an adjustment to the provision made as well as to the related asset.

Any decrease in the provision for decommissioning and therefore any decrease in the value of related assets, may not exceed the net book value thereof. If there is any excess over the net book value this is adjusted directly in the Income Statement.

If a change in the assessment of the dismantling obligation leads to an increase in the provision for decommissioning and consequently in an increase of the net value of the related assets, the Group considers whether this is an impairment indicator of the asset as a whole, and if so, tests the asset for impairment. If, for mature fields, the revised


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estimate of the value for the oil and gas assets net of decommissioning liabilities exceeds the reco-verable amount, the proportion of the increase is recognised in the Income Statement.

The discount rates used to calculate the present value of the estimated cash flows is a risk-free interest rate, considering the temporal horizon of the associate cash flows and these are reviewed at each reporting date.The amount of decommissioning provision is increased at the reporting date, to reflect the time value of money, and the variation is recognised as a financial expense in the financial statements.

When the decommissioning provision is adjusted to reflect changes in the discount rates, the effect of the change in the liability is broken-down be-tween i) the time value of money for one year more that has passed, which is recognised in financial results and ii) the effect of the variation on the present value of the liability, which is recognised in the related asset for which the decommission provision was recognised.

Over time, the discounted liability is increased by the change in present value based on the discount rate that reflects current market assessments and specific liability risks. The estimate of the decommissioning costs for the assets related with participating interests on the blocks that the Group operates as an investor (in its share in the participating interest) is not rela-ted with the Group acting as the National Conces-sionaire.

(ii) Abandonment fund (Concessionaire)The amounts allocated to the abandonment fund (Concessionaire) are the responsibility of the field operators and are transferred to the custody of the Company, as National Concessionaire. The fund is intended to cover future costs related to the de-commissioning of oil wells, removal of platforms and other facilities when reserves are exhausted, as disclosed in Note 18.1.

(o) Taxes

Oil taxesSonangol Group companies, involved in crude oil and natural gas exploration and production, are subject to Income Tax on oil activities disclosed in Note 19.3, and are exempt from other income taxes due by other companies in Angola. This oil taxation is defined and regulated by Law 13/14 – Law of Taxation of Petroleum Activities.

According to this Law, the taxable income of each block is based on the monthly estimated produc-tion, communicated to the competent tax authori-ties through provisional tax declarations and paid within the time limits established by law.

The provisional tax returns are replaced at the end of the period by final tax returns, corrected by “tax reference prices”, by the final costs incurred in petroleum operations and by operating costs incurred by the companies.

Taxes, duties and fees above include:

• Tax on oil production - applied on the quanti-ties of crude oil and natural gas produced in the year, valued at tax reference prices;

• Transaction Fee of oil – applied to the annual profit of Concession Contracts at a 70% rate and deductible for the purpose of determining the taxable amount of income tax on oil;

• Income tax on oil – applied to annual profits (net of oil production tax and oil transaction fee) applied to Concession Contracts and Production Sharing contracts.

Deferred taxesThe calculated tax refers exclusively to current inco-me tax. The Group does not recognise any other de-ferred tax, asset or liability, resulting from temporary differences between the accounting and tax basis.

(p) Sales and services renderedRevenue is recognised to the extent that it is pro-bable that economic benefits will flow to the Group and the revenue can be reliably measured. Reve-nue is measured at the fair value of the considera-tion received or receivable, net of discounts, taxes and other obligations relating to their realisation.

The main Group revenue categories are as follows:

a) Sales of crude oil – participant in the Con-tractor Groups;b) Sales of crude oil – concessionaire;

c) Sales of refined products;

d) State grants (subventions);

e) Services rendered – leases;

f) Services rendered – shipping;

g) Services rendered – logistics.

Sales of crude oil – participant in the Contractor GroupsRevenue from the sale of crude oil and natural gas and oil by-products is recognised when the signi-ficant risks and rewards of ownership have been transferred, which is considered to occur when the asset is transferred to the customer. This usually occurs when the product is physically transferred to the ship or other delivery mechanism.

Revenue from oil and gas production where the Group has participating interests with other pro-ducers is recognised on the basis of the Group’s share in accordance with the production sharing contracts (PSC).When the forward contracts (to buy or sell) on oil and natural gas are signed, the sales and purcha-ses are disclosed by the net amount. Sales of crude oil - ConcessionaireAs the National Concessionaire (“NC”), Sonangol EP holds the mining rights attributed by the Ango-lan State (Law 10-04 article 4). The NC may asso-ciate with other entities to execute the oil and gas operations or request the Government to directly attribute the concession, subject to approval of the Ministry and to a public tender.

NC decides who its associates are as well as the content of the contract to execute the oil and gas operations (e.g. production sharing contracts), subject to approval of the Ministry in what relates to the association as well as to the contents of the contract.

The premium for the contract signing which is paid by the associates to the NC reverts fully to the Sta-te and are not considered as part of the revenue.Receivables from NC correspond mainly to the share of Petroleum- Profit as established in each contract, which is the crude oil produced and col-lected and not used in the oil and gas operations, deducted from the crude oil for cost recovery.

The crude oil share usually results from the application of a formula defined in each production sharing agreement (PSA) in accordance with the profitability of the Contractor Group in the deve-lopment area and with the depth of groundwater where it was obtained.

On the other hand, also in accordance in the law in force, Sonangol has to deliver to the State the amount corresponding to the sales performed as National Concessionaire deducted from its margin (in 2017, 7%), determined over the sales measured at the reference price of the State Budget. Law No. 23/14 of 31 December of 2017 has set the fiscal reference price of the State Budget in 46 USD/Bar-rel for 2017. The retained margin should cover the expenses related with the supervision and control of its associates and of the oil and gas operations. This amount is recognised as an expense under the caption Concessionaire cost (sales on behalf of the State).

Sales of refined productsSales of refined products relate to sales of gaso-line and diesel, among others, and the revenue is recognised when the sale occurs in accordance with the price list in force.

State grants (subventions)In accordance with the Executive Decree No. 17/95 updated by Executive Decree No. 127/04 and complemented by Executive Decree No. 27/05, by Order No. º77/10 and by Presidential Decree No. 1/12, the Company recognises on the basis of the defined structure of charges, margins and selling prices to the public, a subvention at prices resul-ting from the quantities of products sold in the period. During the period in which revenue from the sale of products is recognised in accordance


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with the table enclosed to Executive Decree No. 97/12 of 26 March, the corresponding subvention is also recognised.

Executive Decree No. 706/15 of 30 December 2015, has defined that with the exception of the kerosene and butane gas, all other refined products would pass to the free price regime, ceasing the State obligation to compensate with any subventions, and Sonangol Group would define the new price.

Services rendered – leasesRevenue from leases relates mainly to leased air-crafts and real estate, including variable and fixed rent components, in accordance with the contrac-ts. Rents are recognised in profit and loss in the related period.

Services rendered – shipping Revenue from shipping is recognised in the mo-ment of arrival at the port of destination, when all performance obligations are fulfilled.

(q) Fair value measurementThe Group measures at each reporting period the investments in listed companies and investmen-ts in investment funds at fair value. Additionally, for impairment testing purposes, the recoverable amount considers the highest between value in use and fair value less costs to sell.

Fair value is the price that would be received to sell an asset or pay to settle a liability in an ordinary transaction between independent market participants. The fair value measurement is based on the assumption that the transaction to sell an asset or to settle a liability takes place:

• In the active market of the asset or liability; or

• In the absence of an active market/asset, in the most advantageous market for the asset or liability.

The fair value of an asset or liability is measured based on the assumption that market participan-ts will consider the price of the asset or liability, assuming that these act, based on of their best economical interest.

The measurement at fair value of a financial asset considers the ability of the market participant to generate economic benefits for the use of the as-set in its best consideration, or for its sale to other market participant.

When necessary, the Group uses appropriate valuation techniques for which has enough availa-ble information to measure fair value, maximizing the use of relevant observable inputs and minimi-zing the use of non-observable inputs.The Group uses listed prices to value investments in listed companies and reports from the entities responsible for the management of investment funds to measure the participations in high risk capital investments.

(r) Current and non-current classificationThe Group has assets and liabilities in its finan-cial position based on the current / non-current classification.

An asset is current when:

• Expected realisation or intention to be sold or consumed in the normal operating cycle;

• Held for the main purpose of sale;

• Forecasted realisation in 12 months after the balance sheet date;

• Cash and cash equivalents that are not res-tricted to be exchanged or used for the payment of a liability until 12 months after the balance sheet date.

All other assets are classified as non-current.

A liability is current when:

• it is expected that the liability will be settled in 12 months after the balance sheet date;

• is held mainly for trading;

• It is due in a 12-month period after the balan-ce sheet date:

a. As defined in a contract; or

b. According to a formal request for payment from the creditor, after verifying contract default.

(s) Employee benefits plans

i) Short-term benefitsShort-term benefits correspond to the expenses incurred with remunerations, fixed or variable, other expenses directly related with employees, and other liabilities recognised in the period asso-ciated with services rendered by employees which will be paid in the future, excluding termination benefits and post-retirement benefits. These are usually recognised under Staff costs caption when incurred.

In accordance with legislation in force, the Group’s employees are entitled annually to one month’s holiday and one month’s allowance, and this right is obtained in the year prior to the payment. Therefore, this liability is recognised in the period when the employee earns this right, regardless of the related payment.

ii) Termination benefitsTermination benefits are recognised when the Group ceases employment before the retirement date, or when the employee accepts the contract termination in exchange for these benefits. So-nangol group recognises the responsibility with termination benefits at the earliest of the following dates: on the date when the Group is no longer able to withdraw the benefits offer or when the Group recognises the restructuring costs under the scope of a provision. Benefits due with a ma-turity of more than 12 months, after the reporting period, are discounted to its present value.

iii) Post-employment benefitsUntil the end of 2011, the Company personnel was covered by a “Defined Benefit Plan” of Sonangol that was closed to new admissions with effect from 1 January 2012, and the active participants were transferred into a new “Defined Contribution Plan” to be financed by the employees as from this date. The new plan covers all future Sonangol employees.

The defined benefit plan remains in place to service the pension obligations of retirees and pensioners, and the curtailment made will corres-

pond to the amount that the subsidiaries included in the new plan will have to finance to the new management entity when of the constitution and operacionalization of this entity. Nevertheless, employees who retired or ceased their relationship with the company until 13 October 2017, date of legal implementation and approval of the new plan by the relevant authorities (Order No. 685/17 of the Ministry of Finance), were covered by the defined benefit plan.

AAA Pensões S.A. was the entity responsible for the management of the fund constituted for So-nangol Pension Plan until 31 December 2013. In 2014, the responsibility for the management of this fund was transferred to Sonangol Vida.

Since then, Sonangol Vida is responsible for the ma-nagement of the fund and associated responsibilities of the Sonangol Pension Plan.

Pension planBenefits are normally determined by a combina-tion of one or more factors, such as age, years of service and base salary (pension). The Group’s pension liability is calculated by independent experts annually, for each plan, at each reporting date, using the Projected Unit Credit Method. The discount rate used in the calculation is determined based on market rates of high quality corporate bonds and that have similar maturity to the related pension liability.

The liabilities are covered by provisions recorded in the balance sheet of the Sonangol Group com-panies.

Actuarial gains and losses resulting from: (i) dif-ferences between financial and actuarial assump-tions used and actual amounts; and (ii) changes in the actuarial assumptions are recognised against equity.

The Group recognises as operating income and expense, in the income statement, current and past service costs and net interest on the liability (asset).

Health care planThe companies of the Sonangol Group in Angola grant benefits under which employees and im-mediate eligible family members have favourable


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conditions in medical assistance and health care services, through the provision of medical care provided through infrastructures owned and ma-naged internally in Clínica Girassol.

The medical benefits plans are classified as de-fined benefit plans. The liabilities are covered by provisions recorded in the balance sheet of the Sonangol Group companies.

Measurement and recognition of the medical be-nefits liabilities are similar to the defined benefit pension liabilities, explained above.

(t) Accrual basisGains and losses are recorded on an accrual basis, therefore these are recognised when they occur, regardless or when paid or received. Differences between amounts paid or received and the related costs and revenues are recognised in Other cur-rent assets and Other current liabilities, respecti-vely, as the differences correspond to a right or a liability for the Group.

Consequently, the captions Deferred expenses and Deferred income include expenses and income that have already been incurred but which relate to future periods and that will be recognised in profit and loss of the related periods by the cor-respondent amount. Accrued income and Accrued expenses relate to income and expenses already incurred and that will be invoiced in the future.

(u) Under/overlifting

As a member of the Contractors GroupIt is industry practice to make Under or Overliftin-gs of its share of crude oil, which is expected to optimise transportation costs between partners.

Underlifting is in fact, under a substance over form principle, a sale made by the stock partner that rightfully belongs to Sonangol. Thus, in case of Underlifting, the partner made a sale on behalf of Sonangol, which is why Sonangol has an ac-count receivable against sales. If the market price of crude oil at the end of each reporting period is lower than the price considered in the valuation of the receivable, an impairment loss is recorded in the income statement against accounts receivable.

Overlifting is a stock sale made by Sonangol which rightfully belongs to the partner. Thus, in case of Overlifting, the Company records an expense un-der mining activity related costs against Accounts Payable.

Receipts and payments of Under and Overlifting balances are offset at a later date through barrels of crude oil as established in the sharing agree-ment. The Company considers that the substance over PSA form is not subject to price risk, since the operation is for own use of the petroleum con-tracting groups and the settlement of Under and Overlifting balances is made through physical pro-duct (Barrels of Crude Oil) . Therefore, accounts receivable and payable are not valued at fair value (own use exemption).

As National ConcessionaireIn its role of National Concessionaire, Sonan-gol may also be in an Under or Overlift position towards its share of oil profit, which is recorded as an account receivable or payable against Conces-sionaire cost (sales on behalf of the State).

(v) Results policy

i) Extraordinary and non-operating resultsExtraordinary income includes extraordinary costs and revenues from activities that are distinguisha-ble from the operating activities and are, therefo-re, not expected to occur regularly and frequently.

Non-operating results is intended to record facts or events of a non-recurring or non-recurring nature.

ii) Financial resultsFinancial results include interests paid on loans, default interests, interests received from appli-cations, gains and losses from exchange rate differences, realised or unrealised, and fair value variations related with financial instruments.

Interests are recognised on an accrual basis.

iii) Income from subsidiaries and associatesIncome from subsidiaries and associates include only dividends received from companies that the Group owns as financial investment. Dividends are recognised when the right to its receivable is established.

(w) Mining activity related costsThis caption includes the share of the Sonangol Group on the costs related with joint operations that are charged by the contract operators and its share on the costs incurred as a block operator.

(x) Related partiesThe entities included in the consolidation perime-ter are considered as related parties by the Sonan-gol Group.

(y) Subsequent eventsEvents occurring after the balance sheet date that provide additional information about conditions that existed at the reporting date are recogni-sed in the Group’s Financial Statements. Events occurring after the balance sheet date that provi-de information on conditions that occur after the reporting date are disclosed in the notes to the consolidated financial statements, if considered material.

(z) Segment reportingThe Group presents operating segments based on Management information according to activities carried out by the various companies included in the consolidation perimeter.

An operating segment is deemed a Group component:

i. that develops business activities from which is possible to obtain revenue and incur in expenses;

ii. whose operating results are regularly reviewed by the person responsible for the Group’s operating decision-making on the allocation of resources to the segment and evaluation of its performance;

iii. for which different financial information is available.

The amounts reported for each operating segment result from the aggregation of subsidiaries and business units defined in the perimeter of each segment. The write-offs of intra-segment transac-tions are made in the segment itself and inter--segments are carried out under Consolidation adjustments.

(aa) Accounting policies, accounting estimates and errors

Accounting estimatesEstimation involves a high degree of judgement based on the latest available, reliable information. An accounting estimate may need revision if chan-ges occur in the circumstances on which the esti-mate was based or as a result of new information or more experience. The effect of a change in an accounting estimate, shall be recognised in profit and loss of the current period in the same caption used to register the accounting estimate.

Given the accounting principles of consistency and comparability of balances, changes in accoun-ting policies should only be made in the following scenarios:

• If required by accounting provisions issued by an appropriate Authority for this purpose;

• If the change results in a more appropriate presentation of events or transactions in the entity’s financial statements.


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Changes in accounting policiesA change in an accounting policy is generally applied retrospectively, i.e., the new accounting policy is applied to the events and transactions as if the new accounting policy had always been applied, being its impact on opening balances recognised in Retained earnings.

ErrorsThe correction of errors, when preparing the fi-nancial statement, from one or more prior periods discovered in the current period, is corrected in profit and loss of the current period, except if it fulfils the characteristics of a fundamental error, in which situation shall be recognised in retained earnings.

Fundamental errors are those errors that have such a significant impact on the financial state-ments of one or more prior periods, that those financial statements cannot be considered to have been reliable at the date of issue.

With the exception of the following, there were no changes in the accounting policies when compared to the prior year.

In 2016, the Group changed the accounting policy regarding the recognition of physical assets acqui-red by Contractor Groups under the Production Sha-ring Contracts entered into with National Conces-sionaire. Thus, the Group recorded under Reversible assets an amount of AOA 167,395,968 thousand.

During 2017, after an in-depth analysis of the rights and obligations related to these assets, Sonan-gol Group reversed that decision, and recorded the impacts of this decision, in the amount of AOA 149,542,492 thousand under Other reserves. Accor-dingly, as at 31 December 2017, the consolidated financial statements do not include Reversible As-sets, and the assets relating to Production Sharing Contracts whose rights and obligations belong to Sonangol have been reclassified to Tangible fixed assets.

For management purposes, the Group is organised into business units based on products and services provided, subdivided in five reportable segments:

• Corporate & Financing, which includes core fi-nancial investments and loans obtain and made by the Group;

• Upstream, representing research and crude oil and natural gas production;

• Midstream, which includes refining and trans-port of products based on crude oil and natural gas;

• Downstream, this segment includes storage, supply and distribution of the products based on crude oil and natural gas to the final customer;

• Non-Core Activities such as aviation services, healthcare services, training activities, real es-tate investments, telecommunications and other non-core financial investments.

2.4 CHANGES IN ACCOUNTING POLICIES

3. OPERATING SEGMENTS

Management monitors the operating results of its business separately, with the purpose of making decisions about resources allocation and perfor-mance evaluation. The performance of a segment is evaluated based on their operating income and expenses which are valued consistently with the consolidated operating income and expenses. The Group financing and the financial results of Sonangol E.P. and Sonangol Finance are managed from a consolidated perspective and are not allo-cated to segments being included in the Corporate & Financing segment.

The table below shows, as mentioned above, the entities included in the consolidation perimeter as defined by the Board of Directors of Sonangol EP and their respective operating segments:


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Company SegmentsSonangol E.P Corporate & Financing

Sonangol Finance Limited Corporate & Financing

Sonangol E.P Upstream

Sonangol Pesquisa e Produção, S.A. Upstream

Sonangol Hidrocarbonetos Internacional, S.A. Upstream

Sonagás - Sonangol Gás Natural, S.A. Upstream

Sonaref, S.A. Midstream

Sonangol – Refinaria de Luanda, S.A. Midstream

Refinaria do Lobito, S.A. Midstream

Sonaref Investimentos e Participações, S.A. Midstream

Sonangol Shipping Holding, Limited Midstream

Sonangol Shipping Angola, Limited Midstream

Sonangol Shipping Services, Limited Midstream

Sonangol Chartering Services limited Midstream

Sonangol LNG Shipping Service Limited Midstream

Sonangol Marine Transportation limited Midstream

Sonangol Marine Services Inc Midstream

Sonangol Shipping Angola (Luanda) Limitada Midstream

Stena Sonangol Suezmax Pool Midstream

Sonangol Shipping Girassol Limited Midstream

Sonangol Huila Limited Midstream

Sonangol Shipping Kassanje Limited Midstream

Sonangol Kalandula Limited Midstream

Sonangol Shipping Kizomba Limited Midstream

Sonangol Shipping Luanda Limited Midstream

Sonangol Rangel Limited Midstream

Sonangol Porto Amboim Limited Midstream

Sonangol Shipping Namibe Limited Midstream

Sonangol Cabinda Limited Midstream

Sonangol Etosha Limited Midstream

Sonangol Benguela Limited Midstream

Sonangol Sambizanga Limited Midstream

Ngol Bengo Limited Midstream

Ngol Chiloango Limited Midstream

Ngol Zaire Limited Midstream

Ngol Cunene (Clyde) Limited Midstream

Sonangol Shipping Ngol Luena Limited Midstream

Sonangol Shipping Ngol Cassai Limited Midstream

Ngol Dande Limited Midstream

Ngol Kwanza Limited Midstream

Cumberland Limited (Ngol Cubango) Midstream

Sonangol Maiombe Limited Midstream

Sonangol Cazenga Limited Midstream

Sonangol Comercialização Internacional, Lda. Midstream

Sonangol Asia Midstream

Sonangol Limited Midstream

Sonangol Hong Kong Limited Midstream

Sonangol USA Midstream

Sonagás - Sonangol Gás Natural, S.A. Downstream

Sonangol Distribuidora, S.A. Downstream

Sonangol Logística, Lda. Downstream

Sonangol Holdings, Lda. Non-core activities

SIIND – Sonangol Investimentos Industriais, S.A. Non-core activities

SONIP - Sonangol Imobiliária e Propriedades, Lda. Non-core activities

Sonair - Serviços Aéreos, S.A. Non-core activities

Clínica Girassol, Sarl. Non-core activities

MSTELCOM – Mercury Serviço de Telecomunicações, S.A. Non-core activities

Instituto Superior Politécnico de Tecnologias e Ciências (ISPTEC) Non-core activities

CFMA - Centro de Formação Marítima de Angola Lda Non-core activities

Academia Sonangol S.A. Non-core activities

Sonangol Vida Non-core activities

Pessoas Desenvolvimento e Associações – PDA Non-core activities

Solo Properties Non-core activities

In 2017, the Group reviewed the allocation of subsi-diaries to the various segments and reclassified the companies Sonangol Comercialização Internacional, Lda., Sonangol Asia, Sonangol Limited, Sonangol Hong Kong Limited and Sonangol USA from the Non-core segment to the Midstream segment, considering that this segment better reflects the operating activity of these companies.

It should be noted that the companies Sonils, Lda.and Inloc Limited, which in 2016 were considered in the Non-core segment, are not considered in any segment

in 2017 as a result of their exclusion from the consolida-tion perimeter defined by the Board of Directors.

As mentioned in note 2.1.4, in 2017, the consolida-tion perimeter now includes the companies Sonangol Maiombe Limited and Sonangol Cazenga Limited which were allocated to the Midstream segment.


120 121

SEGMENT REPORTINGConsolidated Income Statement for the year ended 31 December 2017

Corporate & Financing

Upstream Midstream Downstream Non Core Consolidation Adjustments

Total

AOA AOA AOA AOA AOA AOA AOA

Sales - 2.130.340.350.652 170.976.822.039 744.415.885.236 1.600.400 (220.778.445.963) 2.824.956.212.364

Services rendered - - 33.210.687.355 142.957.414 49.174.301.252 (16.221.295.262) 66.306.650.759

Other operating income - 50.911.405 4.588.851.410 (913.367.117) 27.936.506.385 (6.881.792.639) 24.781.109.444

- 2.130.391.262.057 208.776.360.804 743.645.475.533 77.112.408.037 (243.881.533.864) 2.916.043.972.567 Variation in finished products and work in progress - 11.266.160.258 (1.395.651.918) 1.417.807.935 - - 11.288.316.275

Concessionaire costs (sales on behalf of the State) - (1.302.579.051.974) - - - - (1.302.579.051.974)

Costs of goods sold and raw materials consumed - (9.990.139.462) (116.392.298.659) (499.487.627.725) (3.798.909.008) 227.836.866.444 (401.832.108.410)

Oil and Gas exploration and operating costs - (277.370.139.798) (437.828.110) - - 2.712.649.684 (275.095.318.224)

Personnel Costs (44.625.473.771) (8.277.167.154) (14.510.638.557) (50.013.142.784) (39.864.773.855) 4.338.550.281 (152.952.645.840)

Depreciation and amortisation (1.822.730.895) (371.492.437.402) (13.471.375.268) (18.727.298.744) (19.497.896.049) - (425.011.738.358)

Other operating expenses (54.004.691.503) (2.323.818.095) (34.833.043.468) (47.230.058.258) (43.283.148.398) 12.071.867.549 (169.602.892.173)

(100.452.896.169) (1.960.766.593.627) (181.040.835.980) (614.040.319.576) (106.444.727.310) 246.959.933.958 (2.715.785.438.704) Operating income: (100.452.896.169) 169.624.668.430 27.735.524.824 129.605.155.957 (29.332.319.273) 3.078.400.094 200.258.533.863 Net financial results 155.355.994.725 (28.135.108.804) (37.647.338.344) (33.593.417.900) 11.054.406.364 - 67.034.536.041

Net gains/ (losses) arising from subsidiaries and associates - - 17.211.109 - 22.435.216.262 - 22.452.427.371

Non-operating results (31.295.873.083) (73.064.795.553) (20.240.622.488) (39.935.733.509) (6.312.546.413) - (170.849.571.046)

124.060.121.642 (101.199.904.357) (57.870.749.723) (73.529.151.409) 27.177.076.213 - (81.362.607.634) Profit before taxes: 23.607.225.473 68.424.764.073 (30.135.224.899) 56.076.004.548 (2.155.243.060) 3.078.400.094 118.895.926.229 Income tax - (59.719.892.808) (4.994.794.227) (26.743.957.447) (2.331.059.100) - (93.789.703.582)

Net income from current activities: 23.607.225.473 8.704.871.265 (35.130.019.126) 29.332.047.101 (4.486.302.160) 3.078.400.094 25.106.222.647 Extraordinary results - - - 2.496.952 2.256.302.348 - 2.258.799.300

Net profit 23.607.225.473 8.704.871.265 (35.130.019.126) 29.334.544.053 (2.229.998.812) 3.078.400.094 27.365.021.947

The above segment reporting presents the aggregated values of the companies comprising the respective operating segments net of Intra-group elimination adjustments within each segment in order to best reflect the economic substance of each Sonangol Group operating segment. The consolidation adjustments column reflects Intra-group elimination adjustments between companies within different operating segments. The translation to USD follows the exchange rate policy described in Note 2.1.2.


122 123

During 2017, the main Group’s assets under cons-truction were related with:

• Construction of Refinaria do Lobito within the midstream segment;

• Construction of 2 drilling vessels within the ups-tream segment;

• Construction of logistics facilities at Barra do Dande within the downstream segment.

Refinaria do LobitoIn 2016 and considering the macroeconomic context, Sonangol’s Board of Directors decided to suspend the construction works of Refinaria do Lobito.

In the meantime, in 2017, the Angolan State reaffir-med its commitment to carry out the construction of Refinaria do Lobito, as it is a national strategic project focused on self-sufficiency in the production of refined products and reduction of imports.

By the end of 2017, Sonangol launched an internatio-nal public tender for investors interested in obtaining an interest in Refinaria do Lobito. 64 Proposals were

As at 31 December 2017, the property plant and equipment natures are detailed as follows:

4. TANGIBLE FIXED ASSETS4.1 TANGIBLE FIXED ASSETS

4.1.1 DETAIL BY NATURE

Items 2017 Gross Amount

2017 Accumulated Depreciation

2017 Net Amount 2016 Net Amount

Land and natural resources 7.732.931.617 - 7.732.931.617 7.162.059.413

Buildings and other construction 466.361.762.819 (147.156.633.786) 319.205.129.033 364.722.150.458

Basic equipment 445.851.578.090 (188.572.473.402) 257.279.104.688 267.357.009.821

Transport equipment 23.723.233.010 (20.459.280.975) 3.263.952.035 10.745.029.018

IT equipment 33.159.430.328 (31.495.117.321) 1.664.313.007 10.933.284.820

Administrative equipment 40.457.481.820 (33.099.314.457) 7.358.167.363 (281.476.434)

Other tangible fixed assets 3.681.388.138 (3.073.842.880) 607.545.258 1.137.287.692

Assets under construction 236.754.443.421 - 236.754.443.421 269.865.527.420

Advance payments for tangible fixed assets

1.503.430 - 1.503.430 6.162.055.451

1.257.723.752.673 (423.856.662.821) 833.867.089.852 937.802.927.657

received, of which 7 were selected, among which will be selected the companies that will be part of the joint venture to implement the project. It is expected that the selection process shall be completed by the end of 2018.

Sonangol’s Board of Directors believes that this new strategic outlook shall incorporate the investments already made and its profitability with the exploration of the future refinery and with the development of industrial projects associated, namely petrochemical industry projects fueled by the discoveries of hydro-carbons in offshore blocks near Lobito. Drilling vesselsThe construction process is still ongoing and the entry into operation shall be carried out in accordan-ce with the Angolan legislation’s Compliance rules (Decree-Law No. 48/06) and competitive daily avera-ge tariffs shall be applied, indexed to the industry’s benchmark prices.

In 2017, the movements occurred in the gross amount of property, plant and equipment were as follows:

4.1.2 MOVEMENTS IN GROSS AMOUNT

Transfers include AOA 16,153,145 thousand rela-ting to assets reclassified from Reversible Assets.

Decreases include the impairment in the amount of AOA 22,174,485 thousand related to the “Com-bined Cycle” power generation plant in the mids-tream segment as disclosed in Note 33. Non-ope-rating results.

In 2017, the construction process of two Suezmax ships was completed and these were transferred to Tangible fixed assets. These vessels are being operated by the Group companies Sonangol Ca-zenga Limited and Sonangol Maiombe Limited.

Items Opening balance Changes in the perimeter

Increases Decreases Transfers Exchange rate differences

Other move-ments

Closing balance

Land and natural resources

7.162.059.413 - 95.698.182 - - 45.703.944 429.470.078 7.732.931.617

Buildings and other construction

563.481.737.724 (125.971.516.717) 3.873.745.708 (8.249.930.261) 33.960.441.045 38.408.825 (771.123.505) 466.361.762.819

Basic equipment 432.334.857.107 (224.690.389) 21.761.367.735 (15.016.521.285) 5.550.604.622 89.543.238 1.356.417.062 445.851.578.090

Transport equipment

40.973.170.744 (17.429.348.189) 741.339.777 (567.953.338) 5.069.378 3.354.191 (2.399.553) 23.723.233.010

IT equipment 33.294.026.395 - 8.324.006 (55.201.224) 4.535.552 2.769.701 (95.024.102) 33.159.430.328

Administrative equipment

45.516.540.276 (4.657.594.873) 150.004.467 (522.070.208) 313.903.892 9.346.362 (352.648.096) 40.457.481.820

Other tangible fixed assets

5.642.317.970 (1.884.675.527) - (76.689.412) - 435.107 - 3.681.388.138

Assets under construction

269.865.527.420 (10.798.197.378) 8.430.037.986 (4.865.623.612) (27.363.787.075) 16.285.548 1.470.200.532 236.754.443.421

Advance payments for tangible fixed assets

6.162.055.451 - - (4.146.427) - 775.385 (6.157.180.979) 1.503.430

1.404.432.292.500 (160.966.023.073) 35.060.517.861 (29.358.135.767) 12.470.767.414 206.622.301 (4.122.288.563) 1.257.723.752.673


124 125

In 2017, the movements occurred in the accumulated depreciations of Tangible fixed assets were as follows:

As at 31 December 2017, oil and gas properties are analysed as follows:

4.1.3 MOVEMENTS IN ACCUMULATED DEPRECIATION

Items Opening balance Changes in the perimeter

Increases Decreases Transfers Exchange rate differences

Other movements

Closing balance

Buildings and other construction

198.759.587.266 (79.642.307.236) 20.788.422.334 (200.859.150) (192.388) 6.968.053 7.445.104.907 147.156.633.786

Basic equipment 164.977.847.286 (160.454.699) 25.437.345.948 (884.901.791) - 39.431.939 (836.795.281) 188.572.473.402

Transport equipment

30.228.141.726 (11.615.277.315) 1.755.501.509 (512.238.153) - 2.741.659 600.411.549 20.459.280.975

IT equipment 22.360.741.576 - 1.162.573.589 (156.262.985) - 6.821.035 8.121.244.106 31.495.117.321

Administrative equipment

45.798.016.710 (4.083.336.412) 3.486.804.133 (3.841.499.952) 192.388 4.356.193 (8.265.218.603) 33.099.314.457

Other Tangible fixed assets

4.505.030.279 (1.655.213.013) 248.159.256 (22.671.529) - 341.818 (1.803.931) 3.073.842.880

466.629.364.843 (97.156.588.675) 52.878.806.769 (5.618.433.560) - 60.660.697 7.062.852.747 423.856.662.821

4.A. OIL AND GAS PROPERTIES4.A.1 DETAIL BY NATURE

All exploration and development investments directly related to mining activity are included in this caption. Costs incurred with the drilling of exploration wells until they result in commercial discovery are consi-dered as an investment in progress, otherwise these will be recorded as expenses if they come to the conclusion that the discovery is not commercial. On the other hand, expenses related to the construction, installation and completion of infrastructures such

as platforms, pipelines as well as other development costs are recorded in Assets under construction until the date on which they become available for use. Development costs are depreciated using the produc-tion units method, which represents the coefficient calculated by the proportion of the production volume recorded in each period over the volume of proven developed reserves at the beginning of that period.

Items 2017 Gross amount 2017 Accumulated depreciation

2017 Accumulated impairments

2017 Net amount 2016 Net amount

Development costs 3.909.565.039.125 (2 492 660 447.430) (268.126.235.049) 1.148.778.356.646 1.317.878.912.919

Abandonment costs 301.383.506.420 (181.631.410.445) (9.284.576.898) 110.467.519.077 131.149.395.251

Work in progress (mining assets) 1.111.239.149.425 - - 1.111.239.149.425 998.177.269.543

5.322.187.694.970 (2.674.291.857.875) (277.410.811.947) 2.370.485.025.148 2.447.205.577.713

In 2017, movements in the gross amount of oil and gas properties were as follows:

In 2017, movements in accumulated depreciation of oil and gas properties were as follows:

In 2017, the movements occurred in accumulated impairment losses of oil and gas properties were as follows:

Increases in the gross amount of oil and gas properties during the year relate essentially to investments made in blocks 15.06 and 32.00.

Transfers relate to the reclassification of exploration and evaluation assets incurred in blocks 15.06 and 32.00 (Note 5A), once that the commercial discovery (well or field) have been confirmed, in accordance with the ac-counting policy adopted by the Group.

4.A.2 MOVEMENTS IN GROSS AMOUNT

4.A.3 MOVEMENTS IN ACCUMULATED DEPRECIATION

4.A.4 MOVEMENTS IN ACCUMULATED IMPAIRMENT FOR THE YEAR

Items 2016 Increases Decreases Transfers Exchange rate differences

Other movements 2017

Development costs

3.647.861.468.902 95.478.176.281 (3.466.853.810) 172.303.070.515 316.490.523 (2.927.313.286) 3 909 565 039 125

Abandonment costs

310.687.127.845 56745.282.041 (1.630.357.589) - 21.667.506 (64 440 213 383) 301 383 506 420

Work in progress (mining assets)

998.177.269.543 156.693.085.443 (161.483.291) 5.480.827.381 126.344.104 (49.076.893.755) 1 111 239 149 425

4.956.725.866.290 308.916.543.765 (5.258.694.690) 177.783.897.896 464.502.132 (116.444.420.424) 5 322 187 694 970

Items 2016 Increases Decreases Transfers Exchange rate differences

Other movements

2017

Development costs 2.100.421.076.067 350.239.436.329 - - 200.490.601 41.799.444.433 2.492.660.447.430

Abandonment costs 179.537.732.594 20.942.060.285 - - 16.057.186 (18.864.439.620) 181.631.410.445

2.279.958.808.661 371.181.496.614 - - 216 547 787 22.935.004.813 2.674.291.857.875

Items 2016 Increases Reversals Transfers Exchange rate differences

Other movements 2017

Development costs 229 561 479 916 227.385.653.559 (88 107 344 194) - 10 449 315 (100.724.003.547) 268.126.235.049

Abandonment costs - 13.668.024.752 - - 389.287 (4.383.837.141) 9.284.576.898

229.561.479.916 241.053.678.311 (88. 107.344.194) - 10.838.602 (105 107 840.688) 277.410.811.947


126 127

Increase of impairment losses includes the amount of AOA 194,529,677 thousand, recognised in Retained earnings relating to prior period adjustments, as disclosed in Note 13. Increases during the year also include the recognition of impairment losses in wells without financial viability, as mentioned in Note 33. In 2017, the Group performed impairment tests on mining assets in production phase, and their

As referred in Note 2.4, during 2017, and after an in-depth analysis of the rights and obligations related to these assets, Sonangol Group decided to reverse the recognition on reversible assets against Other reserves in the amount of AOA 139,074,518 thousand, and Accounts receivable from the Angolan State, in the amount of AOA 10,467,974 thousand. Accordingly, as at 31

4.B. REVERSIBLE ASSETS4.B.1 MOVEMENTS IN GROSS AMOUNT

December 2017, the consolidated financial statements do not include Reversible Assets, and the assets relating to Production Sharing Agreements whose rights and obligations belong to Sonangol have been reclassified under Tangible fixed assets, in accordance with accounting policy described in Note 2.3 g).

In 2017, the movements occurred in Reversible assets were as follows:

The decrease results from the reversal of reversible assets in the amount of AOA 149,542,492 thousand following the discontinuity in the application of the policy adopted in 2016.

The transfer in the amount of AOA 17,853,476 thousand, corresponds to the real estate assets used by the Group received from the Contractor Group of Block 18 and 31, recognised under Tangible fixed assets - Buildings and Other Constructions.

Item Opening balance Increases Decreases Transfers Exchange rate differences

Closing balance

Reversible assets 167.395.967.501 - 149.542.491.726 17.853.475.775 - -

167.395.967.501 - 149.542.491.726 17.853.475.775 - -

As at 31 December 2017, Intangible assets were analysed as follows:

In 2017, the movements occurred in the gross amount of Intangible assets were as follows:

Changes in Goodwill, compared to the previous period, results from the exclusion of Sonils and Inloc from the Group’s consolidation perimeter.

Goodwill comprises:

• Excess of the consideration transferred for the acquisition of Refinaria de Luanda from Fina Petróleos and the fair value of identifiable net assets acquired and liabilities assumed in the amount of AOA 33,783,792 thousand.

The decrease in Goodwill and Business acquisitions, compared to the previous period, is justified by the exclusion of Sonils from the Group’s consolidation perimeter.

In 2017, the movements occurred in accumulated depreciation were as follows:

5. INTANGIBLE ASSETS5.1 DETAIL BY NATURE

5.2 MOVEMENTS IN GROSS AMOUNT

5.3 MOVEMENTS IN ACCUMULATED DEPRECIATION

Items 2017 Gross Amount 2017 Accumulated Depreciation


Goodwill 33.783.792.000 - 33.783.792.000 61.547.521.500

Business acquisition 1.364.645.267 (322.249.105) 1.042.396.162 2.125.039.342

Incorporation expenses 104.139.029 (104.139.029) - -

Other intangible assets 20.988.741.980 (20.337.866.050) 650.875.930 1.387.159.134

56.241.318.276 (20.764.254.184) 35.477.064.092 65.059.719.976

Items Opening balance Increases Decreases / Changes in the perimeter

Exchange rate differences

Closing balance

Goodwill 61.547.521.500 - (27.768.097.500) 4.368.000 33.783.792.000

Business acquisitions 2.365.013.267 - (1.000.368.000) - 1.364.645.267

Incorporation costs 104.128.980 - - 10.049 104.139.029

Other intangible assets 21.163.598.749 35.643.468 (216.030.080) 5.529.843 20.988.741.980

85.180.262.496 35.643.468 (28.984.495.580) 9.907.892 56.241.318.276

Items Opening balance Increases Decreases / Changes in the perimeter


Closing balance

Goodwill - - - - -

Business acquisitions 406.701.925 82.275.180 (166.728.000) - 322.249.105

Incorporation costs 104.128.980 - - 10.049 104.139.029

Other intangible assets 19.609.711.615 856.215.873 (129.319.584) 1.258.145 20.337.866.050

20.120.542.520 938.491.053 (296.047.584) 1.268.194 20.764.254.184

recoverable amount increased compared to the previous period, mainly due to the new estimate of the price curve and the discount rate, which resulted in an impairment reversal for mining assets in the amount of AOA 84,822,931 thousand, recognised under Non-operating results.


128 129

5.A. EXPLORATION AND EVALUATION ASSETS5.A.1 DETAIL BY NATURE

5.A.2 MOVEMENTS IN GROSS AMOUNT

As at 31 December 2017, Exploration and evaluation assets were as follows:

During 2017, movements in the gross amount of Exploration and evaluation assets were as follows:

Exploration and evaluation assets includes all exploration and evaluation investments directly related with mining activity. Costs incurred with the drilling of exploration wells until they result in commercial discovery are considered as an

Items 2017 Gross Amount 2017 Accumulated depreciation

Impairment 2017 Net amount 2016 Net amount

Exploration and evaluation assets 69.730.294.839 - (4.770 927.841) 64.959.366.998 509.723.972.264

Acquisition of participating interests 567 936.115.691 - (181.720 549.961) 386.215.565.730 215.035.602.798

637.666 410.530 - (186.491 477.802) 451.174.932.728 724.759.575.062

Items 2016 Increases Decreases Transfers Other movements Exchange rate differences

2017

Exploration and evaluation assets:

B15.06 64.214.806.872 16.968.118.291 - (79.710.723.136) - 5.454.407 1.477.656.434

B22.11 (162.059.729) - - - - (20.636) (162.080.361)

B31.00 310.003.279.154 - - - (309.462.174.207) 26.054.591 567.159.538

B32.00 98.662.666.362 191.939.884 (97.827.660.292) - 8.328.051 1.035.274.006

B37.11 - 840.618.621 - - - 35.290 840.653.911

B21.09 - 24.353.503 - - 21.597.080.637 907.690 21.622.341.830

Bloc 2 - S.Tomé - - - 3.409.075.000 - - 3.409.075.000

Iraq 37.005.279.600 - - - - 4.660.950 37.009.940.550

Venezuela 3.929.778.960 - - - - 494.970 3.930.273.930

513.653.751.223 18.025.030.299 - (174.129.308.427) (287.865.093.570) 45.915.313 69.730.294.834

Acquisition of participating interests:

B09.09 23.306.064.477 - - - - 2.935.484 23.308.999.961

B31.00 - - - - 309.462.174.207 12.991.539 309.475.165.746

B21.09 215.035.602.798 41.685.500.000 - - -(21.597.080.637) 27.927.823 235.151.949.984

238.341.667.275 41.685.500.000 - - 287.865.093.570 43.854.846 567.936.115.691

751.995.418.498 59.710.530.299 - (174.129.308.427 - 89.770.159 637.666.410.530

5.A.3 MOVEMENTS IN ACCUMULATED IMPAIRMENT

During 2017, movements in accumulated impairment of Exploration and evaluation assets were as follows:

2017 impairment losses include AOA 158,411,550 thousand relating to unproved oil and gas properties recorded in the Income Statement under Non-operating income and expenses.

Block 21.09Sonangol’s Board of Directors believes that this block has potential for profitability due to the contingent resources of oil and gas. The potential of this block is associated with the existence of a gas contractual matrix which is currently under development by a ministerial group of which Sonangol EP is a member. In the absence of a clear regulation allowing the gas resources valuation, it is difficult to perform a reasonable evaluation, based on solid and consistent assumptions with the results of the ministerial work group. However, Sonangol’s Board of Directors expects that the efforts already initiated by the Angola Government will allow the resources valuation and monetization in line with the returns’ expectations foreseen at the date of the investment in the block.

Block 31During 2017, Sonangol’s Board of Directors recognised an impairment loss in Block 31 of AOA 158,411,550 thousand under Non-operating income and expenses, with the purpose to decrease the carrying amount of the assets related to this block to the best estimate on

Items 2016 Increases Decreases Transfers Other movements


2017

Exploration and evaluation assets:

B37.11 - 840.618.621 - - - 35.290 840.653.911

Venezuela 3.929.778.960 - - - - 494.970 3.930.273.930

3.929.778.960 840.618.621 - - - 530.260 4.770.927.841

Acquisition of participating interests:

B09.09 23.306.064.477 - - - - 2.935.484 23.308.999.961

B31.00 - 158.404.900.000 - - - 6.650.000 158.411.550.000

23.306.064.477 158.404.900.000 - - - 9.585.484 181.720.549.961

27.235.843.437 159.245.518.621 - - - 10.115.744 186.491.477.802

the recoverable amount. Sonangol’s Board of Directors believes that the 2nd Hub of Block 31 has potential for profitability due to the total estimated contingent resources of oil and gas. The related resources are divided and distributed over 15 small fields, thereby increasing development costs as opposed to a conventional development. However, efforts have been made to find more efficient techniques that can reduce the investment needs in infrastructures, increasing its economic attractiveness and, therefore, recovering the net book value.

Acquisitions to COBALTDuring 2017, the Group amicably concluded the dispute innitiated by Cobalt International Energy, Inc. on 8 May 2017 regarding the acquisition of blocks 20/11 and 21/09 by Sonangol.

The agreement signed between the parties has determined that in addition to the payment made to Cobalt in 2015, in the amount of USD 250 million as an advance payment for the acquisition of participating interests disclosed in Note 9.2.1 in 2016, Sonangol is required to make additional payments throughout 2018 in the amount of USD 500 million.

IraqAs mentioned in Note 38 Events after the balance sheet date, in 2018, Sonangol entered into a

investment in progress, otherwise these are considered expenses. In case of a commercial discovery, assets are transferred to oil and gas properties.


130 131

Purchase and Sale Agreement with the Vertex Capital Investments Group for the transfer of 86% of the shareholding in Sonangol P&P Iraq, a company based in the Cayman Islands and which holds, through a branch incorporated in Iraq, participating interests in two oil fields in Iraq, which foresees that Sonangol will be reimbursed for investments already made to date.The success of this agreement depends on the conclusion of the due diligence to be undertaken

by the Vertex Group and the formal consent by the National Oil Company of Iraq. If these conditions are not met, the contract shall be automatically terminated. The Board of Directors believes that the precedent conditions for the fulfillment of this agreement will be ensured and that the value of the investments already made in Iraq will be recovered.

As at 31 December 2017, the financial investments by type of measurement are detailed as follows:

6. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES6.1 DETAIL BY TYPE OF MEASUREMENT

Net amount 2017 2016

Financial investments – cost less impairment losses 452.486.522.178 442.906.989.553

Financial investments – fair value 149.304.763.921 28.021.873.581

601.791.286.099 470.928.863.134

As at 31 December 2017, the detail of financial investments measured at cost less impairment losses were as follows:

Items % Held 2017 Gross Amount 2017 Accumulated impairment


ACS 100% 5.771.589.028 - 5.771.589.028 796.688.890

AGOLE 100% 2.295.769 (2.295.769) - -

ALM 50% 129.909 - 129.909 129.893

AMA 33% 15.427.500 (15.427.500) - -

Angoflex 30% 1.084.724.391 (1.084.724.391) - -

Angola Cables 9% 2.248.831.929 - 2.248.831.929 2.248.548.662

Angola LNG Supply Ltd 23% 413.532.789.980 (159.201.596.424) 254.331.193.556 270.294.704.175

Angola LNG Supply Services 73% - - - 18.514.978

Angolan LNG Fleet Management 50% 28.516.947 (18.828.830) 9.688.117 -

BAI (Banco Angolano de Investimentos) 9% 1.275.840.744 - 1.275.840.744 1.275.840.744

Banco Caixa Geral Angola 25% 5.657.563.888 - 5.657.563.888 5.657.563.888

Banco Economico, S.A. 39% 28.368.000.000 (10.294.953.816) 18.073.046.184 18.073.046.184

Banco Millennium Angola 20% - - - 5.333.568.082

Bauxite 20% 491.250.000 (491.250.000) - -

Bayview 16% 136.000 (136.000) - -

BCI - Banco de Comércio e Indústria, SARL 1% 79.147.425 (79.147.425) - -

Biocom 20% 1.051.800.000 - 1.051.800.000 1.051.800.000

Bricomil 15% 39.343.274 (39.343.274) - -

Cardlane Limited 100% 6.259.750 (3.840.312) 2.419.438 16.000.300

China Sonangol International 30% 73.992.592.422 (73.992.592.422) - -

Cogesform - Comércio Gestão e Formação 100% 16.000.300 (16.000.300) - 6.259.750

Diranis 100% 145.621.667 (145.621.667) - -

E.I.H. - Energia Inovação Holding, SA 30% 2.701.890 (2.701.890) - -

Embal 30% 305.363.246 (305.363.246) - -

Enco, SARL 78% 2.579.284.614 (598.833.001) 1.980.451.613 1.980.450.857

Esperaza Holding B.V. 60% 12.397.138.198 - 12.397.138.198 12.397.138.198

ESSA 100% 18.668.650 - 18.668.650 18.668.650

Genius, Lda 10% 701.250.000 (701.250.000) - -

Gesporto 70% 1.400.000 (1.400.000) - -

Jasmin (Joint Venture) 30% 1.902.040.499 (310.779.856) 1.591.260.643 3.470.032.251

Kicombo 60% 60.000.000 - 60.000.000 60.000.000

Kwanda Lda 30% 13.141.040 - 13.141.040 13.141.040

Lobinave 75% 525.647.462 (525.647.462) - -

Luanda Waterfront 26% 6.099.427.614 - 6.099.427.614 6.099.427.614

Luxervisa 80% 2.000.988.000 (2.000.988.000) - -

Mota Engil Angola 20% 6.494.048.204 (1.873.689.264) 4.620.358.940 4.620.358.940

Net One 51% 2.219.595.939 (2.219.595.939) - -

OPCO 23% 3.801.877 - 3.801.877 3.801.398

Inloc Limited 100% 27.769.500.000 - 27.769.500.000 -

Paenal - Porto Amboim Navais 10% 7.500.000 - 7.500.000 7.500.000

6.2 DETAIL BY ENTITY – FINANCIAL INVESTMENTS – COST LESS IMPAIRMENT LOSSES


132 133

Petromar 30% 9.198.728 - 9.198.728 9.198.728

Puaça 100% 4.234.624.283 (4.234.624.283) - (61.876.949)

Puma Energy 28% 101.387.608.141 - 101.387.608.141 101.387.608.141

S. Tomé e Principe Offshore 51% 765.000 (765.000) - -

Somg 23% 3.801.877 - 3.801.877 3.801.398

Sonacergy 40% 304.168.263 - 304.168.263 304.168.263

Sonadiets 30% 6.439.161 - 6.439.161 6.439.470

Sonadiets Service 30% 309 - 309 -

Sonaid 30% 11.705.107 - 11.705.107 11.705.107

Sonair USA 50% 1.875.000 - 1.875.000 1.875.000

Sonamet 40% 356.351.721 - 356.351.721 356.351.721

Sonangalp 51% 501.880.661 - 501.880.661 501.880.661

Sonangol Cabo-Verde 100% 2.162.710.815 - 2.162.710.815 2.162.710.815

Sonangol Hidrocarbonetos USA, Ltd. 100% 21.287.491.915 (21.287.491.915) - -

Sonangol Holdings USA 100% 399.528.106 (399.528.106) - -

Sonangol São Tomé e Príncipe 100% 1.091.346.145 (515.413.862) 575.932.283 579.770.322

Sonangol Starfish Oil & Gas, S.A. 100% 28.399.740.260 (28.399.740.260) - -

Sonasing Kuito 30% 233.922.597 (233.922.597) - -

Sonasing Mondo 10% 107.545 - 107.545 107.545

Sonasing OPS 50% 537.726 - 537.726 537.726

Sonasing Sanha 30% 270.000 - 270.000 270.000

Sonasing Saxi - Batuque 10% 107.545 (107.545) - -

Sonasing Xicomba 30% 270.000 - 270.000 270.000

Sonasurf International 49% 401.360.038 - 401.360.038 401.360.038

Sonatide Mar - SMS 51% 52.460 - 52.460 52.460

Sonatide SML 51% 43.786 - 43.786 43.786

Sonils 30% 6.439.161 - 6.439.161 -

Spal 50% 48.932.000 - 48.932.000 48.932.002

Technip Angola 40% 1.042.720 - 1.042.720 1.042.720

Sonasurf Angola 50% 187.500 - 187.500 187.500

Miramar Empreendimentos 40% 75.600.000 - 75.600.000 75.600.000

Sonimech, Lda. 30% - - - 25.009.200

Sonils Limited 100% - - - 560.206

Unitel 25% 3.646.655.808 - 3.646.655.808 3.646.199.199

Societe Ivoirienne de Reffinage 20% 3.375.000.000 (3.375.000.000) - -

764.859.122.534 (312.372.600.356) 452.486.522.178 442.906.989.553

Compared with 2016, investments in Sonils Ltd. and Inloc limited were included in this caption as they were excluded from the consolidation perimeter in 2017, as mentioned in Note 2.1.4.

During 2017, the Group recognised a capital gain resulting from the disposal of the financial interests in Banco Millenium Angola and in Banco Privado Atlântico of AOA 12,466,432 thousand, and consequentlyrecognised the disposal of these financial investments.

Financial investment in Angola LNGThe financial investments in Angola LNG Limited, Angola LNG Operating Company - Sociedade Operacional Angola LNG (OPCO), Angola Gas Pipeline Company - Sociedade de Operações e Manutenção de Gasodutos, SA (SOMG) and Angola LNG Supply Services, correspond to a22.8% share in companies responsible for refining natural gas in Angola, which Sonangol Gás Natural participates together with other operators, namely Chevron with 36.4% and Total, BP Amoco and ENI,

all with 13.6%. In addition, the Group holds a 50% interest in Angola LNG Marketing Limited (ALM).LNG Ltd. is the gas refinery and is the main focus of the consortium investment. LNG Supply Services is the company responsible for the cargo dispatch between the refinery and the final customer. SOMG is the company responsible for the maintenance and repair of the refinery

infrastructure and OPCO is the company responsible for providing technical expertise to operate the refinery. Finally, ALM is responsible for the product distribution in Europe and was created to replace ALNG SS.

In 2015 and 2016, the Group recognised impairment losses in this financial investment in the amounts of AOA 82,237,344 thousand and AOA 58,354,800 thousand, respectively.

In 2017, new impairment tests were perfomed on he financial investment in Angola LNG Ltd which did not result in additional impairment losses, mainly due to the improvement in the operational and financial situation of the project and the expectation of a significant improvement in 2018 revenues, resulting from the increase in production and prices.

The recent approval of the Gas Law - Presidential Legislative Decree No. 7/18 of 18 May, will allow new developments in the industry. The shareholders of Angola LNG are in line with this legal initiave, and are willing to invest in new sources of gas supply. Consequently, other specific measures that will allow Angola LNG to play an even greater role as investor in new gas projects is under discussion with the competent authorities.

During 2017, the shareholders of Angola LNG Ltd. decided to reduce the share capital by USD 400 million, of which USD 91,2 million (AOA 15,207,509 thousand) attributable to Sonangol, whose receipt was recognised as a reduction in the carrying value of the investment.

During 2017, the movements in the financial investment in Angola LNG Supply Ltd were as follows:

Entity 2016 Net Amount Amounts Paid Amounts Received

Provisions Other Adjustments


2017 Net Amount

Angola LNG Ltd.

270.294.704.175 - (15.207.508.800)

- (789.947.901) 33.946.082 254.331.193.556

270.294.704.175 - (15.207.508.800) - (789.947.901) 33.946.082 254.331.193.556

As at 31 December 2017, the financial investments measured at fair value relate to the investment in Banco Millennium BCP,as follows:

6.3 DETAIL BY ENTITY – FINANCIAL INVESTMENTS – FAIR VALUE

Items % held 2017 Fair value 2016 Fair value

Banco Millennium BCP 19,49% 149.304.763.921 28.021.873.581

149.304.763.921 28.021.873.581


134 135

In 2016, and following a share capital increase and a share regrouping, where each lot of 75 shares was converted to one single share of Millennium BCP, Sonangol EP became the owner of 140.454.871 shares, representing a qualifying holding of 14,87% in the bank , as at 31 December 2016. In 2017, following the share capital increase of Millennium BCP, Sonangol E.P. acquired 2,163,186,020 shares for AOA 37,882,756 thousand.

Fair value changes were as follows:

Sonangol’s shareholding in Millennium BCP is a strategic investment, since it is a relevant support for diversification of investments in geographies such as Africa and Europe and enhances the Company’s internationalisation.

Despite the extended devaluation on the stock exchange over the past recent years, Millennium BCP has made progress in the implementation

In addition, during 2017 Sonangol EP acquired 642,713,023 shares, in the amount of AOA 28,427,943 thousand. Accordingly, as at 31 December 2017, the company holds 2,946,353,914 shares representing a qualifying participation in the Bank’s share capital of 19.49% valued at fair value, based on market price as at 31 December 2017. The table below details the position in the balance sheet of the company:

Year No. of SharesFair Value

EUR AOA

31-12-2007 180.000.000 525.600.000 58.030.181.977

31-12-2008 469.000.000 379.890.000 42.032.258.380

31-12-2009 469.000.000 397.008.500 51.025.914.471

31-12-2010 685.138.638 398.750.687 48.676.293.902

31-12-2011 794.933.620 108.110.564 13.671.878.185

31-12-2012 3.803.587.403 285.268.647 13.671.878.185

31-12-2013 3.803.587.403 635.877.509 85.245.738.843

31-12-2014 10.534.115.358 695.251.614 86.982.929.381

31-12-2015 10.534.115.358 516.171.653 76.689.170.933

31-12-2016 (*) 140.454.871 150.427.167 28.021.873.581

31-12-2017 (*) 2.946.353.914 801.408.265 149.304.763.921

(*) upon conversion of shares

Opening balance Acquisitions Fair Value Changes Closing balance

Amount in EUR 150.427.167 355.948.133 295.032.964 801.408.265

Amount in AOA 28.021.873.581 66.310.699.460 54.972.190.880 149.304.763.921

of its Restructuring Plan, which resulted in the valuation of the bank’s shares by approximately AOA 54,972,191 thousand during 2017, recognised against Net financial results (see note 31).

These securities are in the custody of Millennium BCP under a contract signed between this bank and Sonangol EP in 2017.

The caption Hotels includes investments in Hotels, such as, HCTA (AOA 10,092,520 thousand), Maianga (AOA 997,622 thousand), Florença (AOA 2,066,584 thousand) and Base do Kwanda (AOA 378,157 thousand). The operations of these Hotels are managed by third parties under exploration contracts and the Group receives rents for its operation (Note 24). The caption Overseas properties relates to the building owned outside the country which is operated by the Solo Properties Group.

The caption Real Estate investment in progress relates mainly to investments in Hotel Eixo Viário (formerly known as Hotel Intercontinental - Hotel & Casino) and Hotel Riomar, in the amount of AOA 74,730,881 thousand and AOA 4,963,065 thousand, respectively.

As at 31 December 2017, Other financial assets are detailed as follows:

As at 31 December 2017, Investments in real estate were detailed as follows:

7. OTHER FINANCIAL ASSETS7.1 DETAIL BY NATURE

7.1.1 REAL ESTATE INVESTMENTS

Items 2017 2016

Real Estate investments 124.016.334.672 125.377.191.386

Energy Fund II & III 11.250.920.211 10.955.402.605

Gateway Fund 46.495.131.658 42.089.909.252

Other financial assets 1.043.653 -

181.763.430.194 178.422.503.244

Items 2017 2016

Real Estate investment:

- Hotels 13.534.883.496 13.405.428.410

- Overseas properties 13.316.705.054 13.930.331.400

- Other properties 13.554.923.474 14.310.124.529

40.406.512.025 41.645.884.338

Real Estate investment in progress:

- Hotels 79.693.946.673 79.731.936.681

- Other properties 3.915.875.974 3.999.370.367

83.609.822.647 83.731.307.048

124.016.334.672 125.377.191.386

As at 31 December 2017, the investment in progress in Hotel Eixo Viário is recorded at historical cost. At the reporting date, the management model for the profitability of this asset is under review, and as such a reduction in value can be identified compared to the value currently recorded. Considering the levels of return associated with this investment as a result of the management model to be be adopted, we are not in a position to reliably determine any impairment losses on this date. Nevertheless, the Group considers that the contractual terms ensure the recoverability and return of the investment.

Outlook for Hotels AssetsWithin future actions aimed at obtaining a return on investments made in hotels (HCTA, Hotel


136 137

Florence, Hotel Suite Maianga, Hotel Riomar, Hotel Eixo Viário), ensuring a better monitoring of the management of those hotels, maximising revenue and reducing costs , the Group intends to develop, among others, the following actions:

• Ensure the entry into operation of Hotel Eixo Viário;

• Setting-up of a Committee to monitor the Hotels activities;

• Technical evaluation of hotels and analysis of management and operating contracts in force;

• Ensure that operators improve marketing and commercial policy in order to attract new cus-tomers, promote new services and penetrate other market segments;

• Revenue Assurance and debt recovery;

• Cost reduction with an emphasis on adminis-trative and maintenance costs;

• Revaluation of the investment decisions to be made, considering the current macroeconomic context and the economic life cycle of each hotel.

In 2017, the movements occurred in the Energy Fund II & III and Gateway Fund were as follows:

The table below details the accumulated movements occurred in investment funds since their incorporation:

In 2017, gains in the amount of of AOA 12,473,118 thousand were recognised under Gains on investments and financial assets and losses in the amount of AOA 1,982,309 thousand were recognised under Losses on investments and financial assets related to these funds (see note 31).

7.1.2 ENERGY FUND II & III AND GATEWAY FUND

7.2.1 ENERGY FUND II E III

ItemsMovements in 2017

Opening balance Gains / Losses Other movements Exchange rate differences Closing balance

Energy Fund II 1.050.616.651 (157.366.080) - 121.203 893.371.774

Energy Fund III 9.904.785.954 6.248.431.631 (5.796.983.300) 1.314.152 10.357.548.437

Gateway Fund 42.089.909.252 4.399.743.921 - 5.478.484 46.495.131.658

Amounts in AOA 53.045.311.857 10.490.809.472 (5.796.983.300) 6.913.839 57.746.051.869

Amounts in USD 318.154.790 62.916.556 (34.766.110) 346.305.236

Items Energy Fund II Energy Fund III 2017 Closing balance

Original cost (invested capital) 20.166.645.737 62.186.976.698 82.353.622.435

Realised gains/ losses 22.074.793.063 32.548.622.580 54.623.415.643

Distributions (Gross) (41.221.945.253) (83.496.011.664) (124.717.956.917)

Unrealised gains/ losses (1.006.573.669) (6.628.922.237) (7.635.495.906)

Fair value of investments 12.919.878 4.610.665.377 4.623.585.255

Other contributions and assets associated to the fund 3.373.057.134 12.199.905.611 15.572.962.745

Management fees (2.492.605.238) (6.453.022.551) (8.945.627.789)

Investment Value 893.371.774 10.357.548.437 11.250.920.211

The table below details the position of this investment fund:

The reported value for venture capital investment Gateway Fund with investment commitment in the amount of AOA 41,687,250 thousand (USD 250,000 thousand) represents its fair value according to the independent fund manager report as at 31 December 2017 and corresponds mainly to investments asso-

The amount reported for the capital risk invest-ments - Energy Fund II and Energy Fund III – re-present their fair value, according to the indepen-dent manager final reports, as at 31 December 2017.

As at 31 December 2017, the Energy Fund II holds investments in Cobalt Energy, Inc. and the Energy

7.2.2 GATEWAY FUND

Fund III holds investments in Cobalt International Energy, Inc, Moreno Energy, Inc, Talen and Targe Energy.

The following table details the investment com-mitments undertaken by Songangol E.P. with the fund management company of Energy Fund II and Energy Fund III:

Description Energy Fund II Energy Fund III

% held9.94% 10,45%

USD AOA USD AOA

Value/Commitment 100.000.000 16.674.900.000 397.000.000 66.199.353.000

Current investments 120.940.130 20.166.645.737 372.937.628 62.186.976.531

Revocable distributions 25.039.053 4.175.237.049 30.978.631 5.165.655.741

Remaining commitment 4.098.923 683.491.311 55.041.003 9.178.032.210

Items2017 2016

USD AOA USD AOA

Investment portfolio 155.714.469 25.965.231.991 83.294.027 13.887.446.534

Balance in Liquidity Management

123.118.577 20.529.899.666 169.152.528 28.202.462.718

Fair value of investment 278.833.046 46.495.131.657 252.446.555 42.089.909.252

ciated to companies in Africa and Asia and to the balance in the liquidity management portfolio.

The table below details the accumulated movements occurred in the investment portfolio since its incorpo-ration:

Items2017

USD AOA

Invested capital 150.210.930 25.047.522.367

Accumulated portfolio gains/ (losses) 27.070.395 4.513.961.296

Distributions (19.815.640) (3.304.238.154)

Management fees (8.128.016) (1.355.338.540)

Other income and expenses related to the portfolio 6.376.800 1.063.325.023

Investment value 155.714.469 25.965.231.991


138 139

The following table details the movements occurred in Gateway Fund during the period:

The amounts expressed in AOA for investment funds correspond to USD amounts converted at the closing date of 31 December 2017.

ItemsLiquidity Management Portfolio Investment Portfolio

USD AOA USD AOA

Opening balance 169.152.528 28.202.462.718 83.294.027 13.887.446.534

Investment (contributions) (65.999.503) (11.005.351.126) 65.999.503 11.005.351.126

Management fees - - (2.859.601) (477.012.673)

Portfolio gains/ (losses) 1.573.332 262.351.538 27.672.760 4.614.405.057

Divestment / Distributions 18.392.220 3.066.884.293 (18.392.220) (3.006.884.293)

Foreign exchange adjustments - 3.552.243 - 1.926.241

Closing balance 123.118.577 20.529.899.667 155.714.469 25.965.231.991

A as at 31 December 2017, Inventories are analysed as follows:

The caption Raw Materials, subsidiaries and consumables represents mainly the materials supporting oil operations, stored in the company’s onshore and offshore logistics bases, as well as materials acquired but still in possession of third parties. Materials are valued at its acquisition pri-ce and subsequently deducted from the respective impairment losses.

8. INVENTORIES8.1 MOVEMENTS IN INVENTORIES

Items 2017 Gross Amount 2017 Accumulated Provisions 2017 Net Amount 2016 Net Amount

Raw materials, subsidiaries and consumables 26.789.755.639 (7.177.159.298) 19.612.596.341 11.319.216.690

Products and work in progress 44.885.614.008 - 44.885.614.008 44.681.924.126

Finished and intermediate products 6.302.765.050 (181.214.855) 6.121.550.195 8.376.730.806

Goods 59.812.329.150 (6.929.540.881) 52.882.788.269 35.589.266.420

Raw materials, goods and materials in transit 2.738.171.643 - 2.738.171.643 579.955.012

140.528.635.490 (14.287.915.034) 126.240.720.456 100.547.093.054

In addition, Inventories show an increase when compared to 2016, due to the inclusion of the stock oil amount not withdrawn by the Contractor Group at the end of 2017.

As at 31 December 2017, Other non-current assets and accounts receivable are detailed as follows:

Trade receivables are mainly related with foreign custo-mers of crude oil and natural gas and supply of by-pro-ducts to public entities. The reduction when compared to the previous year is justified by the improvement of the collection process to public entities and offsets made in 2017. The balance of non-current trade receivables in the amount of AOA 21,740,870 thousand is mainly related to credit sales of real estate assets in the non-core segment.

9. OTHER NON-CURRENT ASSETS AND ACCOUNTS RECEIVABLE9.1. DETAIL BY NATURE

ItemsCurrent Non-current

2017 2016 2017 2016

Trade receivables 205.916.312.053 362.003.383.761 21.740.870.521 -

Suppliers - debt balances 6.173.990.086 4.851.395.286 - -

State 3.399.467.597 18.145.814.885 - -

State (PNUH - Centralities) 130.209.218.927 146.348.502.033 282.827.039.063 412.984.241.118

Subsidaries and associates 19.685.805.285 15.025.144.238 54.392.493.075 106.369.424.609

Personnel 2.462.621.731 2.207.397.334 - -

Concessionaire Rights – Assets 232.793.159.247 105.201.103 - -

Transactions as Concessionaire 667.824.753.952 -

Receivables – Mining activities 135.295.853.721 132.374.730.284 - -

Receivables – Underlift 238.223.804.130 22.639.052.046 - -

Other receivables 71.488.060.810 42.237.337.467 29.353.285.617 93.833.859.375

1.713.473.047.540 745.937.958.438 388.313.688.276 613.187.525.103

As at 31 December 2017, the outstanding amounts of the Contractor Groups are included in Receivables - Mining Activities, resulting from the joint operations in Blocks in which the Group has participating interests. These debts are the result of the difference between the funds requested to develop the operations in the blocks and the expenses incurred in these blocks.

The debtor position of Underlifting is essentially related with the position in 3 non-operated blocks (Blocks 14, 15/06 and FS/FST) and the operated block (3.05).


140 141

As at 31 December 2017, the accounts receivable from subsidiaries and associates valued at cost less impairment losses (where applicable), are detailed as follows:

Intercompany loans to each of the above entities are subject to the respective contracts. These intercompany loans are investments made by the Group in investees and the payment terms are deferred in accordance with the respective con-tracts.

In 2018, the Group started a set of proceedin-gs with the indebted entities, in order to ensure the recovery of debts. The strategy followed has proved to be very favorable and with immediate effects, as the first repayments of the loaned ca-pital have already occured.

9.2 SUBSIDIARIES AND ASSOCIATES

9.2.1 SUBSIDIARIES AND ASSOCIATES (NON-CURRENT)

Items 2017 Gross Amount 2017 Accumulated Impairment losses


Puaça 11.423.732.695 (919.514.849) 10.504.217.845 10.503.322.746

Genius 30.083.832.007 (30.083.832.007) - 10.234.389.679

Embal 172.510.006 (172.510.006) - -

Lobinave 1.670.601.483 (1.670.601.483) - -

Biocom 13.659.002.656 - 13.659.002.656 13.658.297.123

Bauxite 83.370.000 (83.370.000) - -

Paenal 8.526.249.900 - 8.526.249.900 8.525.636.280

Luanda Waterfront 3.046.339.800 - 3.046.339.800 3.046.120.560

Diranis 7.230.736.767 (7.230.401.723) 335.044 -

Sonasing OPS - - - 1.469.438.531

Angoflex 298.220.387 (298.220.387) - 58.413.815

Sonangol Starfish Oil & Gas, S.A. 94.448.495.027 (94.448.495.027) - -

Sonangol Hidrocarbonetos USA, Ltd. 16.777.621.478 (16.777.621.478) - -

Exem Africa Limited - - - 16.001.037.904

Esperaza Holding B.V. 1.168.225.062 - 1.168.225.062 1.168.093.380

Cobalt - - - 41.682.000.000

Sonangol São Tomé 33.351.602 (11.714.685) 21.636.917 21.630.915

Iraq 17.466.485.851 - 17.466.485.851 -

Other - - - 1.043.676

206.088.774.720 (151.696.281.646) 54.392.493.075 106.369.424.609

The change in Cobalt receivable of AOA 41,682,000 thousand refers to the reclassification of the amount paid for the acquisition of participating interests in Blocks 20/11 and 20/11, to Exploration and evaluation assets.

The change in Iraq receivable of AOA 17,466,485 thousand refers to the reclassification of the loan previously disclosed in note 9.3.1 Other receiva-bles (non-current), since it is a Group entity.

The detail of other receivables is analysed as follows:

9.2.2 SUBSIDIARIES AND ASSOCIATES (CURRENT)

9.3 OTHER RECEIVABLES

9.3.1 OTHER RECEIVABLES (NON-CURRENT)

Items 2017 Gross Amount 2017 Accumulated Impairment losses


ESSA 1.215.769 - 1.215.769 -

Sonangol Cabo Verde, SA 167.621.219 - 167.621.219 348.605.270

Mota Engil Angola 650.247.050 - 650.247.050 355.012.600

SONAID 4.806.245.099 - 4.806.245.099 4.805.899.202

Paenal 438.119.496 - 438.119.496 796.143.559

Porto STP 402.961.132 - 402.961.132 402.961.132

Aeroporto STP 874.896.074 - 874.896.074 1.411.345.256

BAI 1.331.811.870 - 1.331.811.870 -

Sonamet/Sonacergy 942.545.376 - 942.545.376 995.299.363

Kwanda 1.144.653.437 - 1.144.653.437 1.227.105.126

Petromar 897.339.511 - 897.339.511 -

ACS 699.958.764 - 699.958.764 492.216.239

Net One - - - 132.507.933

Angola Cables - - - 581.453.328

Unitel - - - 245.534.510

Paz-Flor 2.127.015.684 - 2.127.015.684 1.824.349.317

Unidades de Trading - - - 1.395.187.264

Sonasing OPS 3.935.429.982 - 3.935.429.982 -

Puma Energy 1.100.543.437 - 1.100.543.437 -

Outros 165.201.386 - 165.201386 11.524.139

19.685.805.285 - 19.685.805.285 15.025.144.238

Items 2017 Gross Amount 2017 Provisions 2017 Net Amount 2016 Net Amount

Cohydro (Nessergy) 29.188.588.599 - 29.188.588.599 29.184.388.599

Monumental 187.582.500 (187.582.500) - -

Space Group 247.622.265 (247.622.265) - -

Force Petroleum Angola 30.077.445.970 (29.914.787.978) 162.657.992 17.964.295.529

Geni 8.952.077.947 (8.952.077.947) - 20.235.810.457

Lektron 21.138.804.329 (21.138.804.329) - 8.625.653.073

Iraq - - 17.464.326.841

Carry à Cupet 3.930.273.930 (3.930.273.930) - -

Other 2.039.026 - 2.039.026 359.384.876

93.724.434.566 (64.371.148.949) 29.353.285.617 93.833.859.375


142 143

On 25 October 2012, Sonangol EP agreed with Nessergy Ltd. to purchase its holding in the Common Interest Zone (CIZ) in the Democra-tic Republic of Congo (95%) for later transfer to Cohydro (NOC Congolese) for the amount of USD 200 million.

The “Preliminary Commercial Agreement” sig-ned between Sonangol EP and Cohydro, dated 27 January 2015, establishes that the amount due to Sonangol EP shall be refunded by Cohydro throu-gh Profit Oil obtained as concessionaire in CIZ to be defined in the PSA to be concluded between both parties.

In accordance with the ordinance regarding the contractual obligations of Sonangol EP employees towards the Group, the balance Social Fund refers mainly to the reduction of trade receivables resul-ting from the sale of residential housing through the subsidiary SONIP.

Assets identified as Concessionaire rights – Assets, refer to the number of barrels corresponding to 7% in 2017 (remaining rights) attributable to Sonangol EP acting as National Concessionaire and include the share of profit oil attributable to the Angolan State under the PSAs, corresponding to 93%.

As at 31 December 2017, the breakdown of balances associated with transactions as a National Concessionaire was as follows:

Sonangol’s Board of Directors expects that nego-tiations will continue with RDC– Cohydro to define a PSA for the CIZ, with profitability and return ensured for both parties.

Given the nature of part of the loans granted, the terms and conditions ensuring the fair and effective return of funds to the Group are, at the reporting date, being analysed by the appropriate State entities.

9.3.2 OTHER RECEIVABLES (CURRENT)

9.4 CONCESSIONAIRE RIGHTS – ASSETS

9.5 TRANSACTIONS AS NATIONAL CONCESSIONAIRE

Items 2017 2016

Social Fund 24.114.756.727 (4.825.086.237)

Social Fund – Advanced payment 4.210.758.100 4.210.758.100

Exem Africa Ldt 13.904.812.487 -

Pension fund 4.827.266.989 1.191.316.960

ZEE Trade receivables - 3.499.421.449

Other receivables from Real Estate activities 7.757.392.917 28.548.782.527

Angola Maritime Training Services 113.599.882 112.168.388

Trading Units 318.099.602 179.367.979

Other 16.241.374.106 9.320.608.301

71.488.060.810 42.237.337.467

Rubricas 2017 2016

Transactions with the Concessionaire

Concessionaire’s revenue 667.824.753.952 -

667.824.753.952 -

In 2016, the outstanding balance related to the Concessionaire’s Revenue amounting to AOA 13,201,815 thousand was disclosed as a deduction to Transactions as National Concessionaire (see Note 19.2).

In 2017, the following movements occurred in the deliveries of the National Concessionaire:

As at 31 December 2017, subventions include the 2015 and 2016 unpaid amounts, as well as the 2017 subventions totalling AOA 27,433,219 thou-sand. This balance will be gradually settled by the Angolan State.

At the reporting date, the reconciliation of the de-bts between the Group and the Ministry of Finance

9.5.1 CONCESSIONAIRE’S REVENUE

Items Quadro Geral das Transacções com a Concessionária

2016 (Note 19.2) Amounts payable Amounts receivable Settled amounts Offsets Other

adjustments 2017

Concessionaire’s revenue (408.753.548.667) (1.157.385.055.291) 71.487.695.387 193.334.678.732 936.600.347.347 - (364.715.882.492)

Receivables from OGE customers 69.902.378.741 - 399.090.811.485 - - 21.320.334.830 490.313.525.056

Subventions 111.210.869.095 - 27.433.218.694 - - - 138.644.087.789

ZEE Industries Settlement 2.994.312.383 - 7.451.805.537 - - - 10.446.117.920

PNUH settlement (capital and interests)

157.275.144.988 - 154.588.953.402 - - - 311.864.098.390

Payments to State entities 96.997.496.601 - - - - - 96.997.496.601

Other movements (16.424.837.945) - - - - 700.148.633 (15.724.689.312)

Total 13.201.815.196 (1.157.385.055.291) 660.052.484.505 193.334.678.732 936.600.347.347 22.020.483.463 667.824.753.952

is at its final stage, which should result in the signature of an agreement on the historical debt position between the parties and the definition of a settlement model for such balances.


144 145

On 31 December 2017, the outstanding amounts by the Contractor Groups are included in the balance Receivables - Mining activities, resulting from the joint operations in Blocks in which the Group has participating interests. These debts are the result of the difference between the funds requested to develop the operations in the blocks and the expenses incurred in these blocks.

The balance Receivables - Mining activities records the outstanding balances of the Partners in the blocks operated by the Sonangol Group, as follows:

9.6.1 RECEIVABLES – MINING ACTIVITIES

Items 2017 2016

NORSK HYDRO ANGOLA/STATOI 3.932.321.774 4.288.232.066

CHINA SONANGOL 9.596.865.344 6.966.422.545

INAFTAPLIN - 105.754.599

SOMOIL 77.466.235.400 68.842.076.231

ENI ANGOLA 3.785.544.802 300.843.713

TOTAL E&P 12.239.131.145 -

NAFTAGAS 643.850.905 -

ACR 2.041.596.217 238.976.225

BRASPETRO 72.609.018 74.648.238

PHILIPS - 3.193.431.991

TULLOW OIL 1.386.769.392 1.425.716.726

ROCOIL 2.673.973.791 -

REPSOL 429.238.106 6.017.302.219

PETROBRAS 31.406.174 12.138.504.660

TEIKOKU 361.552.185 356.648.272

SOCO 32.243.420 65.393.131

POLIEDRO OIL CORPORATION, 13.625.428.805 13.616.198.418

KOTOIL, SA. 14.533.142.994 14.523.798.292

FRIEDLANDER 46.216.153 47.514.131

CONOCOPHILLIPS COMPANY - 3.441.731.091

PRODOIL 2.834.829.214 3.668.795.474

EXEM 1.430.320.396 1.436.934.119

OTHER, including Cut Back (11.867.421.514) (8.374.191.857)

135.295.853.721 132.374.730.284

As at 31 December 2017, Cash and cash equivalents are detailed as follows:

Bank deposits (current) include AOA 57,131,945 thousand related with contributions made by the partners in Blocks 19, 20, 21, 35, 38 and 39, plus interest, aiming to finance the future Technology Research Center (Centro de Investigação Tecno-lógico (CITEC)), which is deposited in an autono-mous bank account.

The Group is evaluating with its international part-ners BP, Statoil and Cobalt, how to make funds transferred for the construction of a Technology Research Center profitable, which is currently at a planning stage and is a key issue for the develop-ment and qualification of the Group’s employees.

The oil market international environment, which has significantly changed in the last 2 years, re-

10. CASH AND CASH EQUIVALENTS10.1 DETAIL BY NATURE


31-12-2017 31-12-2016 31-12-2017 31-12-2016

Trading securities - 19.834.813.655 - -

Cash in transit - 24.308.355.547 - -

Bank deposits 858.571.140.142 782.763.898.275 274.858.738.713 222.410.168.298

Cash 25.359.740 35.242.759 - -

858.596.499.882 826.942.310.235 274.858.738.713 222.410.168.298

commended a carefully management and appli-cation of the funds which was made with the full approval of all the international partners.

In addition to the significant investment required for the construction of the Technology Research Center, there is also a need to add a high amount of funds for equipment and recruitment of highly qualified personnel which at this time are unavai-lable.

Bank deposits (non-current) include AOA 274,858,739 thousand deposited in escrow accoun-ts (accounts with movements restricted to autho-rization)) owned by Sonangol EP which reflect the contributions made by the Contractor Groups of blocks 15 and 17 to cover future dismantling costs.


146 147

10.2 DETAILS OF TRADING SECURITIES

As at 31 December 2017, the movements occurred in trading securities are analysed as follows:

The reduction in this caption is explained by the maturity of Bonds of Banco Millennium Atlântico held by Sonangol EP and reimbursed on 1 January 2017 and by the exclusion from the consolidation

As at 31 December 2017, Other current assets are analysed as follows:

Products Initial amount (USD)

Reimbursements (USD)

Change in the consolidation

perimeter (USD)

Net amount (USD)

Net amount (AOA)

Acquisition date Maturity

BPA bonds 25.000.000 (25.000.000) - - - 31.12.2011 01.01.2017

Treasury bonds 2.252.222 - (2.252.222) - - 14.12.2015 27.11.2017

Treasury bonds 1.269.069 - (1.269.069) - - 14.12.2015 17.12.2017

Treasury bonds 1.504.825 - (1.504.825) - - 14.12.2015 16.09.2022

Treasury bonds 17.255.331 - (17.255.331) - - 14.12.2015 30.10.2022

Treasury bonds 12.372.161 - (12.372.161) - - 01.06.2016 29.03.2018

Treasury bonds 15.465.995 - (15.465.995) - - 31.03.2016 17.11.2018

Treasury bonds 15.465.845 - (15.465.845) - - 17.03.2016 23.02.2018

Treasury bonds 6.168.237 - (6.168.237) - - 14.07.2016 17.11.2018

Treasury bonds 2.158.598 - (2.158.598) - - 09.07.2016 19.07.2018

Treasury bonds 5.242.925 - (5.242.925) - - 07.09.2016 19.07.2018

Treasury bonds 2.466.907 - (2.466.907) - - 27.09.2016 28.09.2018

Treasury bonds 3.084.271 - (3.084.271) - - 28.09.2016 28.09.2018

Treasury bonds 3.701.537 - (3.701.537) - - 07.10.2016 08.02.2018

Treasury bonds 3.700.273 - (3.700.273) - - 26.10.2016 18.10.2018

Treasury bonds 1.856.907 - (1.856.907) - - 16.09.2016 10.02.2017

Total USD 118.965.103 (25.000.000) (93.965.103) - -

Total AOA 19.834.813.655 (4.168.199.992) (15.666.613.663) - -

perimeter in 2017 of SONILS, a company of the Group that held, at 31 December 2016, investmen-ts in Treasury Bonds.

11. OTHER CURRENT ASSETS

Items 2017 2016

Accrued income:

Refined products - 451.376.649

Aircraft 915.084 -

Rents 4.850.196.563 295.310.343

Other 1.493.816.330 3.072.333.500

6.344.927.977 3.819.020.492

Deferred costs:

Docking and freight 101.295.583 499.312.086

Insurance 40.637.544 93.139.992

Other 811.226.870 3.668.702.991

953.159.997 4.261.155.069

7.298.087.974 8.080.175.562

Sonangol E.P. is fully owned by the Angolan State.As at 31 December 2017, the Company’s share capital was fully subscribed and paid up in the amount of AOA 1,000,000,000 thousand.

The table below shows the movements of Share capital and Supplementary capital contri-butions in 2017:

As at 31 December 2017, reserves are analysed as follows:

The increase recorded in Supplementary capital contributions in the amount of AOA 900,390,559 relates to the recent funds inflows of the sole Shareholder of Songangol E.P., under the Supplementary Capital Contributions agreement entered into with both parties in the amount of USA 10,000,000 thousand.

12. SHARE CAPITAL AND SUPPLEMENTARY CAPITAL CONTRIBUTIONS

13. RESERVES AND RETAINED EARNINGS

Items 2016 Increases 2017

Share capital 1.000.000.000.000 - 1.000.000.000.000

Supplementary capital contributions 946.558.748.877 900.390.559.111 1.846.949.307.988

1.946.558.748.877 900.390.559.111 2.846.949.307.988

Items 2016 Net profit application

2017 net profit

Actuarial gains and losses

Changes in the consolidation

perimeter

Prior year adjustments

Other movements

2017

Legal reserves 73.050.147.081 - - (12.504.600) - (50.003.879.094) 23.033.763.387

Other reserves 322.972.636.221 22.747.551 - (36.541.957.280) (1.058.626.931) (141.467.110.479) 60.158.782.749 204.086.471.831

Evaluation fund

190.521.373.503 - - - - (11.670.959.999) 178.850.413.504

Investment fund

774.945.200.920 - - - - 165.605.150.411 940.550.351.331

Retained earnings

(1.023.390.645.332) 13.258.930.673 - - (69.978.927.072) (815.527.595.256) (166.889.094.066) (2.062.527.331.053)

338.098.712.393 13.281.678.224 - (36.541.957.280) (71.050.058.603) (956.994.705.735) (2.799.999.999) (716.006.331.000)

Foreign Exchange translation adjustments

838.166.239.916 - - - (15.671.409.784) 245.499.693.348 (287.697.975) 1.067.706.825.505

Net profit 13.281.678.224 (13.281.678.224) 27.365.021.947 - - - - 27.365.021.947

851.447.918.140 (13.281.678.224) 27.365.021.947 - (15.671.409.784) 245.499.693.348 (287.697.975) 1.095.071.847.452

1.189.546.630.533 - 27.365.021.947 (36.541.957.280) (86.721.468.387) (711.495.012.387) (3.087.697.974) 379.065.516.452


148 149

In accordance with the Presidential Law No. 42/10, of 10 May (that establishes the rules of profit distribu-tion), the Company´s net profit should be distributed as follows:

• 10% to legal reserve, whose cumulative value should not exceed 2% of the statutory capital;

• At least 10% for the constitution of the fund to evaluate the potential for extraction of hydrocarbon resources;

• At least 5% to fund other investments;

• Up to 5% to the social fund;

• Distribution of individual incentives to employees and members of the governing body, as profit participation within the limits established by the applicable legislation;

The table below details the movements occurred in Other reserves in 2017 rela-ting to prior year ajustments:

Write-off of reversible assetsThe derecognition of reversible assets in the amount of AOA 139,074,517,595 thousand is disclosed in Notes 2.4 and 4B.

The table below shows the movements occurred in Retained Earnings in 2017 related to prior year adjustments, deemed as fundamental errors:

• Other voluntary funds that are approved by the Board of Directors and approved by the appropriate State agencies.

Actuarial gains and losses reflects the movements arising from the Group’s post-retirement benefit plans (pensions and health care) as well from the curtailment arising from the extinction in 2012 of the attributions of these benefits to the native employees.

In order to standardise the Group’s financial reporting with the generally accepted accounting principles and in accordance with the best practices, defined by national and international standards, several adjust-ments were deemed as fundamental errors and the-refore recognised under Other reserves or Retained Earnings, as applicable.

Description AOA

Write-off of reversible assets (139.074.517.595)

Other (2.392.592.884)

Total (141.467.110.479)

Description AOA

Write-off of foreign exchange differences recognised as assets in 2016 against foreign exchange translation reserves (241.394.325.466)

Impairment of mining assets (194.529.677.022)

Health care provisions (175.348.643.819)

Impairment of loans granted (56.497.934.399)

Reversal of interests capitalised in prior years (51.008.217.315)

Abandonment provisions (28.100.799.990)

Mandatory charges in the Downstream segment (21.460.409.651)

Other (47.187.587.594)

Total (815.527.595.256)

Write-off of foreign exchange differences recog-nised as assets in 2016 against foreign exchange translation reservesIn 2016, the Group recorded in foreign exchange reserves the amount of AOA 241,394,325 thousand related to potential foreign exchange differences incurred by Sonangol EP with borrowed funds for the acquisition of equity shares of subsidiaries. During 2017, the Group decided to review this accounting treatment and concluded that it is not compatible with the Accounting Policies defined by the current Board of Directors and adopted by the Sonangol Group in the preparation of its consoli-dated financial statements. Given this, the amount was adjusted against Retained Earnings.

Impairment of mining assetsThe amount of AOA 194,529,677 thousand is re-lated with prior year adjustments in impairment losses arising from the review and adjustment of the assumptions adopted in the 2016 impairment calculation, namely the discount rate, price curve and the consideration of reserves certified by inde-pendent external entities in the impairment tests. Given that this information was already available at the 2016 reporting date, this amount was recog-nised in Retained Earnings.

Health care provisionsThe amount of AOA 175,348,644 thousand relates to the recognition of liabilities for past services with post-employment benefits of Sonangol Health Plan, whose initial liability as at 1 January 2017 was recorded against Retained Earnings, as dis-closed in Note 17.1.

Impairment of loans grantedThe Group has recorded in its financial statements loans granted to companies in the private business sector with the purpose of promoting economic development and entrepreneurship. In accordance with the accounting policy defined by the Group, as at 31 December 2017, the Group analysed the prospects for recoverability of the loans granted and concluded that there were strong signs of impairment, and therefore recorded impairment losses in the amount of AOA 55,653,927 thousand, as disclosed in Note 9. Considering that these signs already existed in 2016, the Group recog-nised these impairment losses against Retained Earnings.

Reversal of interests capitalised in prior yearsThe amount of AOA 51,008,217 thousand is related to the impact of the correction of the approach for calculating the interest incurred in prior years with the financing of qualifying assets and the analysis of the prospects for the recoverability of associated assets. Considering that the correction of the approach and that the signs of impairment arise from prior years, the adjustment was offsett against Retained Earnings.

Abandonment provisionsThe amount of AOA 28,100,800 thousand corres-ponds to corrections from previous years resulting from the review and adjustment of the assump-tions adopted in the estimate of the 2016 aban-donment provision, to the best practices of the oil industry, namely, considering the abandonment models recommended by the National Concessio-naire and the update of wells explored and to be abandoned in the future. Given that this informa-tion was already available at the reporting date, this amount was recognised in Retained Earnings.

Tax charges in the downstream segmentThe amount of AOA 21.460.410 thousand resul-ts from additional industrial tax charges of prior years in the Downstream segment.

Other movements This caption includes the effect of accounting adjustments to the 31 December 2016 individual financial statements of the subsidiaries after the preparation of Sonangol Group 2016 consolidated financial statements. In 2017, and considering its materiality, the Group recognised against consoli-dated Retained earnings the effect of these subse-quent accounting adjustments. In addition, the column Other includes reclasi-fications between Reserves, Retained Earnings and Investment and Evaluation Funds. In order to reflect in the consolidated financial statements the amounts recorded in Sonangol EP individual financial statements, the Investment Fund and the Evaluation Fund reserves, were reclassified by AOA 175,526,217 thousand and AOA -11,670,960, respectively against Retained Earnings. Additio-nally, AOA -9,921,067 thousand were reclassified from Other Reserves to Investment Fund Reserves.


150 151

The position of the Group’s loans in the short, medium and long term, as at 31 December 2017, is detailed as follows:

Loans obtained from national banking were used to finance non-core projects and were fully settled in 2017.

The change in Other loans (Carry) results from the reclassification of AOA 11,617,414 thousand rela-

Current and non-current Group’s loans from International banks, as at 31 December 2017, are detailed as follows:

15. LOANS

15.1 INTERNATIONAL BANK LOANS


2017 2016 2017 2016

International bank loans 205.246.243.620 436.059.281.229 610.597.380.607 1.123.493.003.462

National bank loans - 840.700.596 - -

Bank overdrafts 16.262.566.000 70.573.459.764 - -

Other loans (Carry) - - - 21.075.501.491

221.508.809.620 507.473.441.589 610.597.380.607 1.144.568.504.953

Items Acquisition year 2016 Increases Reimbursements Exchange rate

differences 2017 Current Non-current Maturity (Months)

International bank loans:

SNL Finance $1Bi (CDB&SCB)

2010 9.924.285.714 - (9.925.535.714) 1.250.000 - - - -

SNL Finance $2,5Bi (ICBC) 2010 104.204.999.930 - (104.218.124.930) 13.125.000 - - - -

SNL Finance $1Bi (CA-SCB) 2011 77.806.400.071 - (77.816.200.071) 9.800.000 - - - -

SNL Finance $1Bi (SCB-KS) 2011 73.638.200.071 - (16.674.899.877) 9.275.167 56.972.575.361 16.674.900.000 40.297.675.361 41

SNL Finance $2Bi (CDBC) 2011 166.728.000.139 - (166.748.999.930) 20.999.791 - - - -

SNL Finance $1.5Bi (SCB) 2012 25.009.200.000 - (25.012.350.000) 3.150.000 - - - -

SNL Finance $1Bi (CDB) 2012 100.036.800.070 - (50.024.699.703) 12.600.000 50.024.700.367 16.674.900.000 33.349.800.367 36*

SNL Finance $2,5Bi (SCB) 2013 111.151.999.931 - (111.165.999.931) 14.000.000 - - - -

SNL Finance $2Bi (SCB) 2014 240.088.320.000 - (53.359.680.000) 30.240.000 186.758.880.000 53.359.680.000 133.399.200.000 42

SNL Finance $1,5Bi (SCB) 2014 217.471.278.780 - (43.499.739.281) 27.391.520 173.998.931.019 43.499.713.620 130.499.217.399 46

SNL Finance $2Bi (CDB) 2014 266.764.799.987 - (33.349.800.007) 33.600.000 233.448.599.980 33.349.800.000 200.098.799.980 84

SNL Finance $1Bi (SCB) 2015 166.728.000.000 - (52.109.062.500) 21.000.000 114.639.937.500 41.687.250.000 72.952.687.500 32

SCB & AFREXIM $0,5 Bn 2017 - 83.374.500.000 (83.374.500.000) - - - - -

1.559.552.284.691 83.374.500.000 (827.279.591.942) 196.431.478 815.843.624.227 205.246.243.620 610.597.380.607 * This loan with due date as at 31 December 2020, was early repaid in January 2018.

During 2017, the Group obtained loanss from international banks to finance its structuring pro-jects and other operating expenses, and settled these during the year. The aforementioned loans have a corporate gua-rantee which requires Sonangol, E.P. to comply with the following debt covenants:

(a) The amount of the “Net equity” should never fall below AOA 1,200,000,000,000.00;

(b) The “EBITDA/ Net Debt” ratio should not be less than 0.5;

(c) The “EBITDA / Debt Service” ratio should not be less than 1.3;

(d) The “Net Debt/EBITDA” ratio should not exceed 2.5;

(e) “Gearing Ratio” should not exceed 100%.

The National Housing and Urban Development Program (Programa Nacional de Urbanismo e Habitação (PNUH)) is a Government initiative, partially implemented by the Group using the financing obtained from international banks. With

regard to the investment made within PNUH, the State recognises the total outstanding amount and its repayment takes place on a monthly basis by offsetting through Revenue of the Concessio-naire, under the terms of the repayment plan agreed between the parties.

This is a relevant issue regarding the technical appraisal of the Group’s financial covenants, as it is the understanding of the Sonangol’s Board of Directors, that a certain inconsistency weighs on these ratios in the calculation parameters used.

This is due to the fact that the value of the debt contracted by Sonangol Finance is being fully con-sidered for the calculation of “DEBT” and “NET DEBT”. However, the State reimbursements on investments made in PNUH are not being reflec-ted on the “EBITDA” calculation.

Given the above and the relevance of such finding in 2016, Sonangol submitted a proposal for cor-rection of the contractual definition of Sonangol EP’s “EBITDA” with the purpose of including in its calculation the PNUH Reimbursements, which received the approval in 2017 of some of the inter-national partners.

Early repayment of bank loans:In 2017, the Group completed the restructuring process of the financial debt whi-ch resulted in the early termination of the following loans:

Loans Date of signature Date of early repaymentAmounts repaid in advance

USD AOA

ICBC $2,5Bn 19-nov-10 30-jun-17 494.791.667 82.506.015.681

CA-CIB & SCB $1,0Bn 28-jun-11 03-jul-17 425.000.000 70.868.325.000

CDB $2,0Bn 21-nov-11 31-ago-17 883.333.333 147.294.949.944

SCB $2,5Bn 22-mar-13 30-jun-17 458.333.333 76.426.624.944

SCB $1,5Bn 28-jun-12 30-jun-17 25.000.000 4.168.725.000

SCB & AFREXIM $0,5Bn 23-dez-16 30-jun-17 361.111.111 60.214.916.648

CDB $1,0Bn 27-dez-12 30-nov-17 200.000.000 33.349.800.333

2.847.569.444 474.829.357.550

During 2017, a partial repayment of AOA 33,349,800 thousand related to the loan of CDB $ 1.0Bn was made, and the remaining amount of AOA 50,024,700 thousand, as at 31 December 2017, was fully settled on 31 January 2018.

ting to Block 32 to current debt recognised under Receivables - mining activities and the reclassi-fication of the amount of AOA 9,458,087 thousand referring to the block 3.05A for Retained Earnings.


152 153

Financing conditionsThe average interest rate on outstanding loans during 2017 was approximately Libor plus a 3,5% spread.

All contracts have as collateral the mandatory requirement to allocate monthly revenues at the rate of 125% of the debt service value to be performed in a certain period.

As at 31 December 2017, the the Group’s provisions for post-employment benefits is detailed as follows:

The liabilities related with post-employment benefits, by type of benefit, are as follows:a

17. EMPLOYEE BENEFITS

Items 2017 2016

Sonangol Pension Plan 114.183.727.744 97.421.350.369

Sonangol Healthcare Plan 208.049.725.818 -

SONILS Pension Plan – Fénix Pensões - 253.480.545

ENSA Pension Plan 8.462.510.151 6.884.265.144

330.695.963.713 104.559.096.058

17.1 POST-EMPLOYMENT BENEFITS

Sonangol Pension Plan

Sonangol Healthcare Plan

SONILS Pension Plan - Fénix Pensões

ENSA Pension Plan

Total

Balance as at 31 December 2016

Defined benefit obligation 97.421.350.369 - 253.480.545 12.834.968.031 110.509.798.944

Fair value of plan assets - - - (5.950.702.886) (5.950.702.886)

97.421.350.369 - 253.480.545 6.884.265.144 104.559.096.058

Balance (receivable) / payable 97.421.350.369 - 253.480.545 6.884.265.144 104.559.096.058

Balance as at 31 December 2017

Defined benefit obligation 114.183.727.744 208.049.725.818 - 13.575.825.062 335.809.278.624

Fair value of plan assets - - - (5.113.314.911) (5.113.314.911)

114.183.727.744 208.049.725.818 - 8.462.510.151 330.695.963.713

Balance (receivable) / payable 114.183.727.744 208.049.725.818 - 8.462.510.151 330.695.963.713

Until the end of 2011, Company’s employees were covered by Sonangol’s Defined Benefit Plan which was closed to new admissions with effect from 1 January 2012, and the active participants were transferred into a new Defined Contribution Plan.

The past service liabilities of active employees at the cut-off date (curtailment) will be financed by contributions that the subsidiaries included in the new plan will transfer to the Sonangol Pension Fund. This liability, updated as at 31 December 2017, is disclosed under Accounts payable (see Note 19).

Therefore, the Sonangol Pension Plan retains res-ponsibility for retirees and pensioners, including

The defined contribution pension plan is based on contributions made by the participants (em-ployees or members of the board of Sonangol E.P. and its subsidiaries). The amount capitalised in the participant’s accumulated account under this pension plan, is subject to a positive or negative variation, as a result of the evolution of the invest-

Defined benefit plansThe types of defined benefits plans are as follows:

17.2 TYPE OF BENEFITS

Plan Type Beneficiaries Location

Sonangol Pension Plan Defined benefit Retirees and pensioners from Sonangol Angola

Former employees with acquired rights

ENSA Pension Plan Defined benefit – fund set in ENSA Retirees and pensioners from ex-Fina Angola


Sonangol Pension Plan Defined contribution Sonangol employees Angola

ments made and of the financial market. Associa-tes (subsidiaries) will not be liable, now or in the future, for the level of income generated or for the benefits provided under the plan. The financing method for the pension plan will be chosen by the associates and the vehicle will correspond to the defined risk profile at the associates’ discretion.

all employees who have retired or have ceased their the labour contract between 1 January 2012 and 13 October 2017, date of legal implementation and approval of the contribution plan defined by the relevant authorities (Order No. 685/17 of the Ministry of Finance).

The Group is depositing in a bank account held by Sonangol EP the amounts related the contribu-tions to the defined contribution plan and to the defined benefits plan. As at 31 December 2017, the balance of this bank account amount to AOA 136,599,217 thousand. Defined contribution plansThe Defined contribution plan is as follows:


154 155

Sonangol Healthcare PlanThe existing Sonangol Healthcare Plan is as follows:

The post-employment health care plan of the Group corresponds to the constructive obligation related to the provision of medical assistance and medication to pensioners and their family members within the Sonangol Healthcare Plan (as established the Internal Standard for Medi-cal Assistance and Medication Co-participation), provided mainly by the Group company, Clínica Girassol.

The accounting and reporting of future liabilities with post-employment benenefit plans is tem-porarily excluded from the General Accounting Plan, until provisions of international accounting standards are fully regulated.


Sonangol Healthcare Plan Defined benefit – unfunded Retirees members Angola

The Group acknowledges that accounting for liabilities arising from the application of inter-national accounting standards is a fundamental step towards a true and fair view of its financial position and performance. Therefore, the Board of Directors decided on the recognition of futu-re liabilities with past services costs associated with the Sonangol Group’shealthcare plan. This liability, although identified in previous years, was not recognised due to the unrealibility in its mea-surement, a situation that was overcome in 2017, with a substantial improvement in the quality of the Group’s database. The initial recognition of this liability, as at 1 January 2017, was recognised against Retained earnings.

The reconciliation between the opening and closing balances of the defined benefit obligation present value is as follows:

17.3 MOVEMENTS WITH POST-EMPLOYMENT BENEFITS

SonangolPension Plan

Sonangol Healthcare Plan

SONILS Pension Plan - Fénix Pensões

ENSA Pension Plan Total

Defined benefit obligation as at 1 January 2017 97.421.350.369 - 253.480.545 12.834.968.031 110.509.798.944

Initial recognition of healthcare liability - 175.348.643.819 - - 175.348.643.819

Interest cost 3.983.206.196 7.392.556.734 - 532.495.402 11.908.258.332

Current service cost - 4.875.169.530 - 223.115.461 5.098.284.991

Benefits paid (7.491.885.353) (2.684.105.387) - (848.199.761) (11.024.190.501)

Actuarial gains and losses 20.257.768.297 23.093.890.805 - 831.916.634 44.183.575.736

Exchange rate differences 13.288.235 23.570.318 - 1.529.295 38.387.847

Sonils exclusion from the consolidation perimeter - - (253.480.545) - (253.480.545)

Defined benefit obligation as at 31 December 2017 114.183.727.744 208.049.725.818 - 13.575.825.062 335.809.278.624

According to the actuarial study carried out as at 31 December 2017, the estimated payment of pension be-nefits in 2018 amounts to AOA 8,789,648 thousand relating to the Sonangol Plan, AOA 690,132 relating to the ENSA Plan and AOA 3,298,650 thousand relating to the Sonangol Healthcare Plan.

The main actuarial assumptions used at the reporting date to determine the defined benefit obligation were as follows:

The reconciliation between the opening and closing balances of the assets’ fair value of the ENSA Pension Plan, the only one set-up with an independent fund, is as follows:

17.4 FAIR VALUE OF PLAN ASSETS

Sonangol Pension Plan

Retirement benefitsaccording to LGT

SONILS Pension Plan - Fénix

Pensões

ENSA Pension Plan Total

Defined benefit obligation as at 1 January 2016 73.789.171.873 11.578.789.433 - 10.551.697.994 95.919.659.300

Interest cost 3.427.767.216 - - 500.550.923 3.928.318.139

Current service costs - - - 194.255.483 194.255.483

Benefits paid (6.397.250.209) - - (1.214.535.451) (7.611.785.660)

Actuarial gains and losses 9.705.186.656 - - 396.027.720 10.101.214.376

Exchange rate differences 16.896.474.832 - - 2.406.971.362 19.303.446.194

Termination of liabilities - (11.578.789.433) 253.480.545 - (11.325.308.888)

Defined benefit obligation as at 31 December 2016 97.421.350.369 - 253.480.545 12.834.968.031 110.509.798.944

2017 2016

Financial assumptions for all plans (Sonangol, LGT & ENSA) % %

Discount rate 3,70 4,25

Future salary growth 3,00 3,00

Pension growth rate (Sonangol Plan) 1,00 1,00

Healthcare costs growth rate 5,00

Mortality table ANGV2020P ANGV2020P

ENSA Pension Plan

Defined benefit (funded)

Fair value of plan assets as at 1 January 2017 5.950.702.886

Expected return on plan assets 239.893.083

Benefits paid (848.199.761)

Other gains and losses (229.759.853)

Exchange rate differences 678.556

Fair value of plan assets as at 31 December 2017 5.113.314.911


156 157

ENSA Pension Plan

Defined benefit (funded)

Fair value of plan assets as at 1 January 2016 5.401.794.287

Expected return on plan assets 251.941.177

Transfer to Sonangol Vida

Benefits paid (1.214.535.451)

Other gains and losses 281.643.904

Exchange rate differences 1.229.858.971

Fair value of plan assets as at 31 December 2016 5.950.702.886

As mentioned in Note 2.3 s), the Group recognises all actuarial gains and losses in equity (reserves). Actuarial gains and losses in 2017 amounted to AOA 36,541,957 thousand, as disclosed in Note 13, which includes AOA 44,183,576 thousand relating to actuarial losses on liabilities for past services of the Pension and Healthcare Plans, AOA 229,760 thousand actuarial losses on ENSA’s plan assets, as described above, and AOA 7,871,379 thousand relating to actuarial gains arising from the move-

The tables below set out the results of the sensitivity analysis to the discount rate, pension growth rate and future salary growthof the Plans.

17.5 ACTUARIAL GAINS AND LOSSES

17.6 SENSITIVITY ANALYSIS

ment of the curtailment liability (see Note 19) cor-responding to employees originally considered in the curtailment liability but who have retired until October 2017 and therefore still benefited from the defined benefit plan, being considered as an actuarial gain in the curtailment liability and an actuarial loss in the defined benefit pension plan.

TABLES IN AOA

3,7% 3,45% 3,95%

Sensitivity to discount rate Accounting scenario -25 p.b Var. .+ 25 p.b Var.

Pension Plan 114.183.727.744 116.826.223.492 2% 111.601.170.257 -2%

Healthcare Plan 208.049.725.818 219.016.746.184 5% 197.640.648.773

ENSA 13.575.825.062 13.957.425.242 3% 13.204.657.907 -3%

335.809.278.624 349.800.394.918 4% 322.446.476.936 -4%

1,00% 0,75% 1,25%

Sensitivity to the Pensions’ growth rate Cenário contabilização -25 p.b Var. .+ 25 p.b Var.

Pension Plan 114.183.727.744 111.620.518.477 2% 116.805.808.245 2%

ENSA 13.575.825.062 13.243.247.832 2% 13.916.754.314 3%

127.759.552.806 124.863.766.309 -2% 130.722.562.559 2%

3,00% 2,75% 3,25%

Sensitivity to Future salary growth Cenário contabilização -25 p.b Var. .+ 25 p.b Var.

ENSA 13.575.825.062 13.520.224.607 0% 13.631.654.125 0%

13.575.825.062 13.520.224.607 0% 13.631.654.125 0%

3,00% 2,50% 3,50%

Sensitivity to the growth rate of healthcare costs Cenário contabilização -50 p.b Var. .+ 50 p.b Var.

Healthcare Plan 208.049.725.818 171.837.566.677 -17% 251.962.545.540 21%

208.049.725.818 171.837.566.677 -17% 251.962.545.540 21%

The table below details the provisions for other risks and charges:

Provisions for legal proceedings cover all litigations where the Group is involved in which future financial outflows are probable.

This balance includes, among others, provisions to cover tax contingencies resulting from audits to recoverable costs of the blocks in which the Group holds participating interests. These contingencies result mainly from the non-compliance with the provisions of production-sharing agreements and association agreements. The amounts recorded represent the best settlement estimate and may

The table below details the movements occurred in 2017 in dismantling provisions where Sonangol participates as an investor:

18.1 DETAIL OF PROVISIONS FOR OTHER RISKS AND CHARGES

18.2 PROVISIONS FOR LEGAL PROCEEDINGS

18.3 TAX CONTINGENCIES

18.4 DISMANTLING PROVISIONS – SONANGOL AS AN INVESTOR

18. PROVISIONS FOR OTHER RISKS AND CHARGES

Items 2017 2016

Provisions for legal proceedings 2.240.610.760 3.419.861.036

Dismantling provisions - Sonangol as an investor 294.706.399.278 228.124.410.974

Abandonment Fund (Concessionaire) 701.693.556.783 632.319.993.564

Tax contingencies 435.643.630.851 322.086.827.568

Other provisions 27.767.737.769 36.141.658.766

1.462.051.935.441 1.222.092.751.908

differ from the final amounts payable as a result of subsequent revisions.

The process of reconciliation and negotiation of tax and customs procedures between the General Tax Authority (Administração Geral Tributárias – AGT)) and the Group is ongoing, and no recognition of additional contingencies is expected.

Items 2016 Exchange rate differences

Increases Decreases Abandonment interest

2017

Dismantling provisions - Sonangol as an investor 228.124.410.974 1.394.973.519 75.447.705.970 (23.856.654.503) 13.595.963.318 294.706.399.278

Total 228.124.410.974 1.394.973.519 75.447.705.970 (23.856.654.503) 13.595.963.318 294.706.399.278


158 159

The change in this balance is mainly related with the review of estimates at the reporting date and with the recognition of the financial interest associated to the provision update. The main assumptions inherent to the calculation of the dis-mantling provision are as follows:

• Discount rate: 4.94%;

• Inflation rate: 2%;

• Maturity: Concession licence expiration date;

• Estimated expenses of the Contractor Group;

The movement in this balance is detailed as follows:

In 2017, the Group has bank accounts held by So-nangol E.P. with a positive outstanding balance of AOA 533,535,010 thousand relating to the amounts set by the different Contractor Groups to cover the abandonment costs.

The abandonment fund (Concessionaire) referred to above was set-up by the operators and trans-ferred to the Company’s custody, as concessionai-

18.5 ABANDONMENT FUND (CONCESSIONAIRE)

Items 2016 Increases Decreases Other movements Exchange rate differences

2017

Provisions for Abandonment Fund – Dealership 632.319.993.564 69.370.087.401 - - 3.475.817 701.693.556.783

632.319.993.564 69.370.087.401 - - 3.475.817 701.693.556.783

re for hydrocarbons. These provisions are inten-ded to cover future expenses with the closure of oil wells, removal of platforms and other facilities, when reserves have been exhausted.

The main inflows during 2017 relate to the decom-missioning of blocks 15 and 17 operated by ESSO and Total EP, respectively.

As at 31 December 2017, the detail of Other non-current liabilities and accounts payable was as follows:

As at 31 December 2017, the detail of the balances associated with transactions as the National Concessionaire is as follows:

During 2017, there were no movements in Price Cap, as shown below:

In 2017, the balance Concessionaire’s Revenue has an outstanding debit balance, and has therefore been disclosed under Other non-current assets and accounts receivable (Note 9.5.1).

19.1 DETAIL OF OTHER NON-CURRENT LIABILITIES AND ACCOUNTS PAYABLE

19.2 TRANSACTIONS AS NATIONAL CONCESSIONAIRE

19.2.2 PRICE CAP

19. OTHER NON-CURRENT LIABILITIES AND ACCOUNTS PAYABLE


2017 2016 2017 2016

Suppliers - current 310.799.367.394 456.227.345.639 1.852.294.953 -

Transactions as National Concessionaire 186.262.266.908 172.141.549.950 - -

Trade receivables – credit balances 1.224.721.834 4.971.729.823 - -

State 224.217.220.777 84.725.759.186 1.987.294.000 -

Subsidiaries and associates 1.351.506.983 4.235.296 - -

Personnel 1.073.411.111 5.386.846.638 - -

Creditors – acquisition of assets 85.834.058 114.634.493 - 1.958.099.968

Creditors – Mining activities 345.438.074.703 263.359.996.019 127.246.312.653 127.532.756.370

Creditors - Overlift 18.103.179.837 5.231.430.283 - -

Pension Fund – Curtailment (Note 17) 110.378.000.258 118.242.102.148 - -

Concessionaire Rights - Liability 425.326.526.699 - - -

Pension Fund - Withholdings 37.692.215.204 27.463.751.373 - -

Other creditors 31.130.010.726 13.363.428.304 678.220.454 8.209.390.074

1.693.082.336.491 1.151.232.809.152 131.764.122.060 137.700.246.412

Items 2017 2016

Transaction as National Concessionaire

Concessionaire revenue - (13.201.815.196)

Bonus 45.654.321.936 45.282.401.154

Price Cap 82.072.328.936 82.072.328.936

CITEC 58.535.616.037 57.988.635.056

186.262.266.908 172.141.549.950

Items 2016 Increases Decreases Other movements 2017

Price cap 82.072.328.936 - - - 82.072.328.936

82.072.328.936 - - - 82.072.328.936


160 161

As at 31 December 2017 the detail of the State balances is as follows

Other taxes includes several types of taxes due by the Group at the balance sheet date, namely capital gains tax, consumption tax andstamp duty.

As at 31 December 2017, the amounts due from joint operations in blocks on which the Group holds participating interests are included in this caption. These debts result from the difference

The Pension Fund – Curtailment relates to the amount that the Group has to deliver to the mana-gement Company of the new pension plan (Defined Contribution) as mentioned in the Note 17. During 2017, the surplus of AOA 7,871,379 thousand was deducted from this liability, which relates to em-ployees who have retired during the period from 1 January 2012 to 31 October 2017, date of formal adoption of the curtailment and that were still inclu-ded in the defined benefit pension plan mentioned

Creditors - Overlift refers to the oil lifting rights due to the Contractor Groups from the perspecti-ve of the Group as partner in the different blocks and National Concessionaire. This balance will be

19.3 STATE

19.4 CREDITORS – MINING ACTIVITIES

19.5 PENSION FUND

19.6 CREDITORS - OVERLIFT

Items 2017 2016

State

Corporate income tax 94.941.546.771 38.385.591.145

Production and consumption tax 1.739.190.835 301.073.260

Oil income tax 46.011.821 123.510.801

Production taxes - 4.976.595.756

Withholding taxes 30.241.694.691 4.517.027.871

Other taxes 97.248.776.659 36.421.960.353

224.217.220.777 84.725.759.186

between the cash calls for the development of the block operations and the expense incurred in these blocks.

in Note 17.3. Therefore, this amount was conside-red as an actuarial gain recorded in reserves. The remaining change in the caption relates to exchange rate differences from liabilities expressed in USD.

The Pension Fund - withholdings refers to Sonan-gol’s withholdings from the employees’ salary ac-cumulated between 2012 and 2017 as stated in the defined contribution pension plan.

adjusted in the corresponding blocks rights during 2018. This balance is mainly due to the non-ope-rated block 31 and to operated blocks 3/05 and 3/05A.

As at 31 December 2017, this balance is detailed as follows:

As at 31 December 2017, this balance is detailed as follows:

The amounts payable to Somoil and Force Petroleum results from the sale of crude oil on behalf of these entities at end of 2017, which will be paid in the following year.

19.7 OTHER CREDITORS

19.7.1 OTHER CREDITORS (NON-CURRENT)

19.7.2 OTHER CREDITORS (CURRENT)

Items 2017 2016

Special clearing account - OGE 511.561.670 1.987.294.000

Other creditors - Academia 30.839.520 6.169.050.563

Other UT’s 135.819.265 53.045.511

678.220.455 8.209.390.074

Items 2017 2016

Sales on behalf of Somoil 3.325.768.187 2.660.364.492

Sales on behalf of Poliedro - 67.946.729

Sales on behalf of Prodoil - 1.044.095.589

Sales on behalf of Force Petroleum 3.322.087.979 -

Sales on behalf of Acrep - 1.445.172.775

Social Fund 3.540.798.761 -

EXEM 11.888.704.792 -

FINA (Minority shareholders) 333.037.500 333.037.500

SAR Project 123.254.206 2.776.156.737

Other 8.596.359.300 5.036.654.482

31.130.010.725 13.363.428.304


162 163

21. OTHER CURRENT LIABILITIES

As at 31 December 2017, Other current liabilities is detailed as follows:

Accrued expenses with staff costs refer mainly to the employees’ holiday pay and allowances to be settled in 2018.

The increase – in Advisory accrued expenses is re-lated with the increase in advisory services in 2017 and with the process of validation and recognition of invoices already issued.

The Mining Activities relate to accrued expenses arising from mining activities (oil and gas).

The balance Acquisition and construction work in condominiums is related with the requalification work performed by suppliers, for which invoices

Items 2017 2016

Accrued expenses

Staff costs 15.951.607.462 12.787.401.901

Advisory costs 20.916.543.368 10.531.076.623

Specialised services/ technical assistance 22.440.728.446 16.197.285.649

Mining activity (non-operated blocks) 4.448.320.093 7.112.139.133

Mining activity (operated blocks) 20.694.093.358 11.257.501.327

Rents 280.451.003 341.023.346

Acquisition and construction work in condominiums 4.482.480.002 6.290.864.010

Bank interests 1.301.086.863 1.753.493.662

Docking and freight (Suezmax, LNG, Other) 5.549.348.350 3.105.428.832

Other 68.206.589.584 23.140.255.379

164.271.248.529 92.516.469.860

Deferred income

Exchange rate adjustment 367.053.630 -

Billing 2.676.761.332 12.119.844.455

Other 309.175.091 311.821.180

3.352.990.053 12.431.665.635

167.624.238.582 104.948.135.495

were not received at the reporting date. The requa-lification and construction work refers mainly to improvements in the Condominiums, Hotel Eixo--Viário and Mutu-Ya-Kevela parking lot.

Docking and freight (Suezmax, LNG, Other) cor-responds to accrued expenses with the docking of Suezmax and LNG ship fleet, as well as with ships not belonging to the Group, but whose respon-sibility falls on the Group, as stated in Bare boat agreements.The change in Deferred income – billing is essen-tially related to the reduction of the activity in the Non-Core segment.

22. SALES

23. SERVICES RENDERED

The table below details the sales by product during 2017.

The table below details the services rendered by activity and nature during 2017.

In 2017 the Group recognised underliftings associated with the activities of Natio-nal Concessionaire. Accordingly, the Concessionaire’s crude oil sales include the amount of AOA 195,069,121 thousand, referring to the debtor position with Contrac-tor groups (underlifts) as as 31 December 2017.

The reduction in the balance Aircraft renting is related to the restrictions imposed by the aviation industry regarding the operation of the H225 Su-per-puma helicopters.

Items 2017 2016

Crude Oil – Association 715.995.187.415 521.916.748.701

Crude Oil – Concessionaire 1.273.392.537.501 859.970.418.952

Refined – Gas 194.000.637.580 214.015.895.655

Refined – Diesel Oil 392.914.496.052 475.509.796.983

Jet A1 44.514.244.632 44.873.650.130

Jet B 13.063.542.926 11.991.809.461

LPG 36.444.764.446 27.443.551.289

Kerosene 6.361.200.561 14.274.082.792

Fuel Óleo 63.302.803.236 34.666.611.545

Naphtha 22.575.783.734 18.233.791.232

Subvention 27.329.197.705 24.217.340.272

Other sales 35.061.816.576 36.663.485.423

2.824.956.212.364 2.283.777.182.435

Items 2017 2016

Aircraft renting 18.156.142.362 36.143.615.543

Ship freight 50.994.093 4.704.087.512

Communication services 9.460.280.806 12.962.068.904

Healthcare and medical services 7.461.795.146 12.022.556.397

Training activities 1.859.624.217 2.089.414.656

Integrated logistics services - 47.683.212.923

Pension Fund management 562.582.319 1.066.316.960

Other 1.892.019.408 2.216.533.725

Services rendered – Domestic Market 39.443.438.351 118.887.806.622

Aircraft renting 4.874.708.079 8.987.939.487

Ship freight 21.450.357.848 24.764.035.411

Real Estate leases 538.146.481 584.300.539

Services rendered – Foreign Market 26.863.212.408 34.336.275.437

66.306.650.759 153.224.082.059

The reduction in the balance Integrated logistics services is explained by the SONILS LDT exclusion from the consolidation perimeter in accordance with Note 2.1.4.


164 165

24. OTHER OPERATING INCOME

25. VARIATION IN FINISHED PRODUCTS AND WORK IN PROGRES

The table below details the Other operating income in 2017.

The table below details the movements in finished products and work in progress during 2017.

The amount of AOA 75,735 thousand refers to royalties charged to Oil and Gas Providers for the sale of gas cylinders with the Group brand (Sonagás).

Supplementary services relates to recharges made in order to compensate te-chnical costs incurred by the technical manager of the LNG fleet ships.

Items 2017 2016

Supplementary services 3.318.706.988 4.535.774.076

Management fees 48.788.547 55.543.761

Fuel rebilling - 2.517.909.635

Gas injection in block 17 - 98.781.516

Royalties 75.735.552 10.201.857

Real Estate management (Hotels) 1.284.108.258 1.313.675.364

Other operating income 20.053.770.099 6.360.674.799

24.781.109.444 14.892.561.009

Items 2017 2016

Finished products and intermediates (818.890.956) 908.098.645

Under/overLift 841.046.973 3.218.676.389

Concessionaire rights 11.266.160.258 (290.196.788)

11.288.316.275 3.836.578.246

26. CONCESSIONAIRE COST (SALES ON BEHALF OF THE STATE)

27. COST OF GOOD SOLD AND RAW MATERIALS CONSUMED

The table below details the cost with the sales on behalf of the State:

The table below details the cost of goods sold and raw material consumed in 2017.

This amount corresponds to the difference between the revenues from the sale of crude oil – Concessionaire’s rights and the mark-up rate of the National Concessio-naire. According to Law No. 13/13 of 7 March, Chapter IV, Article 8, this mark-up rate is determined at 7% based on the barrel price used in the 2017 State Budget.

Concessionaire’s Revenue 2017 2016

Sales on behalf of the State

Concessionaire - Block 2-05 400.420.798 343.871.398

Concessionaire - Block 3-05 23.409.612.367 28.694.241.944

Concessionaire - Block 3-05A 629.232.683 120.668.141

Concessionaire - Block 4-05 1.410.488.005 1.549.580.352

Concessionaire - Block 14 65.289.848.617 60.175.259.766


Concessionaire - Block 15/06 27.018.593.170 14.547.011.885




Concessionaire - Block Cabinda Sul 303.323.130 265.395.964

1.098.674.323.161 895.401.469.527

Final position of crude oil liftings as Concessionaire

Underlifts 185.716.912.340 -

Overlifts 18.187.816.473 -

203.904.728.813 -

1.302.579.051.974 895.401.469.527

The amounts of underlifts and overlifts reflect the per-formance of National Concessionaire in which the Group has conducted liftings of profit oil share allocated to the Angolan State, below (underlifting) or above (overlifting) its rights calculated in accordance with the production--sharing agreement (PSA).

Items 2017 2016

Raw materials and consumables 8.377.052.863 (34.208.982.978)

Goods 393.455.055.547 421.593.097.552

401.832.108.410 387.384.114.574


166 167

27A. OIL AND GAS EXPLORATION AND OPERATING COSTS

27A.1. DETAIL OF RESEARCH AND PRODUCTION COSTS

The table below details the Oil and Gas exploration and operating costs in 2017.

The table below details the Research and production costs in 2017.

The reduction recorded under Oil and gas exploration and operating costs is influenced by the exchange rate effect of the depreciation of the Kwanza (AOA) against the US dollar.

Items 2017 2016

Research costs 2.599.036.254 7.765.571.323

Production costs 200.988.209.374 204.254.546.456

Custom fees 4.232.649.900 3.871.530.239

Crude oil commercialisation cost - (1.607.628.983)

Royalties 67.273.008.014 50.792.667.994

Other 2.414.682 -

275.095.318.224 265.076.687.029

2017 2016

Items Production Research Total Total

Block 0 92.396.994.310 - 92.396.994.310 83.329.325.350

FS/FST 6.989.071.070 79.802.001 7.045.531.359 6.379.115.365

B03.05 13.268.760.102 - 13.268.760.102 12.551.023.032

B03.05A 583.310.821 - 583.310.821 620.696.440

B04.05 6.006.551.825 (3.667.527) 6.002.884.298 2.896.476.374

B05.06 4.285.859 112.582.233 116.868.092 2.756.663.030

B09.09 652.312 404.364 1.056.676 (29.401.257)

B14.00 8.280.490.437 131.725 8.280.622.162 17.820.807.022

B14.KU 588.205.882 - 588.205.882 1.415.390.863

B15.06 32.609.708.612 254.113.950 32.863.822.562 21.612.709.740

B17.06 2.802.236 19.629.572 22.431.808 27.348.698

B18.06 - -822.435 (822.435) 35.285.839

B21.09 115.545.960 456.114.359 571.660.319 1.150.708.995

B22.11 - 490.586.076 490.586.076 505.085.627

B31.00 38.406.878.534 - 38.406.878.534 41.164.862.399

B32.00 499.608.646 214.846.155 714.454.801 573.779.846

B35.11 - 208.850.071 208.850.071 276.176.928

B36.11 - 145.978.087 145.978.087 377.136.941

B37.11 - 111.668.775 111.668.775 410.600.999

BOC.ST 954.939.864 - 954.939.864 1.011.810.237

GEP -Total 597.818 - 597.818 437.559

Other 279.805.085 - 279.805.085 15.406.830.517

SHI CUBA - 508.818.849 508.818.849 1.703.693.650

TOTAL 200.988.209.374 2.599.036.254 203.587.245.628 212.020.117.779

The cost optimisation policy implemented in 2017 by the operators at the national level and the Group’s accuracy in controlling costs incurred with

Expenses with post-employment benefits Expenses with post-employment benefits are recognised under Personnel costs and are detailed as follows:

different suppliers were the main reasons for the decrease in research and production costs in 2017.

28. PERSONNEL COSTS

The table below details the personnel costs in 2017.

Items 2017 2016

Wages and salaries 123.705.741.595 131.069.177.412

Extraordinary services 185.538.424 257.866.190

Shift allowance 671.155.732 749.399.790

Training expenses 1.586.303.360 2.101.176.835

Family allowance 256.066.257 452.088.193

Social Security expenses 4.873.564.801 4.869.304.136

Celebration parties and social action expenses 190.041.950 1.877.307.517

Accommodation expenses 897.849.195 784.133.317

Insurance expenses 1.143.703.467 1.473.567.501

Post-employment benefits 16.766.650.240 3.870.632.445

Uniforms 2.309.999 2.926.325

Other 2.673.720.820 10.380.878.523

152.952.645.840 157.888.458.184

Sonangol Pension Plan Sonangol Healthcare Plan ENSA Pension Plan

Defined benefit Defined benefit Defined benefit Total

2016 Net cost

Current service costs - - 194.255.483 194.255.483

Interest cost 3.427.767.216 - 500.550.923 3.928.318.139

Expected return arising from plan assets - - (251.941.177) (251.941.177)

Total 3.427.767.216 - 442.865.229 3.870.632.445

2017 Net cost

Current service costs - 4.875.169.530 223.115.461 5.098.284.991

Interest cost 3.983.206.196 7.392.556.734 532.495.402 11.908.258.332

Expected return arising from plan assets - - (239.893.083) (239.893.083)

Total 3.983.206.196 12.267.726.264 515.717.780 16.766.650.240


168 169

29. DEPRECIATION AND AMORTISATION

30. OTHER OPERATING EXPENSES

The table below details the other operating expenses in 2017.

As at 31 December 2017, this balance is analysed as follows:

Other Operating expenses reduced by 25% compared to the previous year, mainly due to the policy of reducing costs and renegotiating the contracts of the Group’s main suppliers.

Items 2017 2016

Tangible fixed assets 52.891.750.691 68.819.328.565

Intangible assets 938.491.053 1.093.802.641

Oil and Gas assets – Development 350.239.436.329 250.590.987.784

Oil and Gas assets – Abandonment 20.942.060.285 49.084.862.295

425.011.738.358 369.588.981.285

Items 2017 2016

Water and energy 667.192.018 967.440.132

Technical assistance 1.902.095.586 5.055.663.425

Audit and advisory services 21.779.702.534 13.286.341.786

Fuel and lubrificants 2.202.434.149 5.364.602.168

Commissions and intermediaries 146.740.036 343.059.526

Communication 4.105.898.628 6.971.350.338

Maintenance and repair 12.554.695.071 16.605.831.519

Litigation and notaries 483.409.093 370.463.717

Travel and accommodation 1.262.290.351 424.496.808

Representation expenses 171.811.434 887.927.720

Meals 422.815.636 3.062.986.763

Fees 1.709.674.134 2.691.628.474

Taxes and duties 19.682.183.018 20.422.507.986

Books and technical documentation 36.441.913 87.817.329

Office equipment 697.089.681 934.644.770

Health and comfort material 3.433.396.419 2.774.786.055

IT equipment 4.075.712.248 5.037.984.676

Offerings and donations 29.964.409 96.793.844

Marketing 3.698.739.197 4.482.361.150

Rents and leases 9.021.950.716 12.234.660.736

Insurance 2.552.122.064 4.791.056.021

Surveillance and security services 6.428.784.794 7.103.231.146

Subcontracts 14.052.774.449 21.832.724.376

Specialised serviaces 17.920.675.382 34.898.138.097

Houston Express Operation 5.819.945.942 6.740.564.765

Block charges / Ship maintenance and operation 20.987.105.670 24.173.368.579

Other-FST 13.757.247.601 23.070.858.270

169.602.892.173 224.713.290.176

31. FINANCIAL RESULTS

The table below details the financial results in 2017.

Interest expense includes the amount of AOA 56,157,930 thousand, over which no amounts were capitalised in the period (31 December 2016: AOA 71,131,979 thousand, over which AOA 35,836,369 thousand were capitalised), related to borrowing charges arising from the loans disclosed in Note 15.

Gains on investments and financial assets include the amount of AOA 54,972,191 thousand related to

Items 2017 2016

Financial income:

Interest income 44.014.528.403 37.705.793.018

Income from investments in Real Estate 190.139.844 2.237.194.078

Gains on investment and financial assets 67.445.309.384 3.123.663.963

Gains on disposal of financial investments 12.466.431.918 -

Payment discounts received 33.694 342.818.574

Other 540.341.947 8.093.348.544

124.656.785.190 51.502.818.177

Financial expenses:

Interest expense (58.139.414.667) (36.536.545.181)

Bank expenses (629.222.922) (3.522.325.031)

Financing charges (2.084.275.000) (2.587.538)

Losses on investments and financial assets (1.982.309.031) (52.260.941.253)

Losses on disposals of financial investments - (525.066.294)

Abandonment interest (13.595.963.318) (11.204.759.629)

Default interest (cost) (26.490.731.296) (7.446.500.502)

Other financial expenses (248.622.156) (67.776.466)

(103.170.538.390) (111.566.501.894)

Exchange rate differences (net) 45.548.289.241 6.031.441.031

67.034.536.041 (54.032.242.686)

changes in the fair value of financial investments (Millennium BCP) in 2017. In 2016, changes in the fair value of this financial investment resulted in a loss of AOA 48,667,297 thousand recorded under Losses on investments and financial assets.The caption Default interests (cost) in the amount of AOA 26,490,731 thousand (31 December 2016: AOA 7,446,501 thousand) is related with late payments to suppliers.


170 171

32. NET GAINS/ (LOSSES) ARISING FROM SUBSIDIARIES AND ASSOCIATESThe table below details the results from subsidiaries and associates in 2017.

Subsidiaries and associates 2017 2016

BAI 1.331.811.870 411.202.708

Banco Caixa Geral Totta Angola 1.363.985.836 1.169.033.832

Enco 105.567.966 106.660.565

Esperaza 14.699.306.700 -

Kwanda 194.939.996 42.038.808

Mota Engil 295.234.450 355.012.600

Puma Energy 1.100.543.437 -

Sonadiets 259.640.683 428.185.889

Sonagalp 872.371.701 -

Sonasing Kuito 100.049.400 -

Sonasurf 1.278.038.580 1.642.866.120

ALNG FLEET MANAGEMENT 17.211.752 -

Sonasing OPS 833.725.000 -

22.452.427.371 4.155.000.522

33. NON-OPERATING RESULTS

As at 31 December 2017, this balance is analysed as follows:

The balance Gains on fixed assets includes the amount of AOA 84,822,931 thousand relating to impairment reversals of mining assets arising from impairment tests performed during the current period, as disclosed in Note 4A.

In 2017, the Group recognised under Non-operating income and expenses, impairment losses for assets, broken-down as follows:

• Impairment of unproved oil and gas properties (AOA 158,411,550 thousand);

• Unsuccessuful development areas (Wells), without economic viability (AOA 44,047,390 thousand);

• Impairment of Combined Cycle Power Plant ( AOA 22,174,485 thousand).

Items 2017 2016

Non-operating income and gains:

Provisions write-back - Inventories 793.240.819 28.754.980.903

Provisions write-back – Bad debts 70.299.620.304 6.295.710.968

Provisions write-back – Legal proceedings - 183.547.447

Provisions write-back – Customer guarantees - 23.400

Provisions write-back – Abandonment Fund 586.279 39.111.952.782

Provisions write-back – Tax contingencies 4.512.520.668 (269.104)

Provisions write-back – Other 5.192.374.656 20.088.525.219

Gains on fixed assets 85.041.197.092 277.266.772.694

Gains on inventories 3.798.981.825 2.281.721.037

Bad debt recovery - 3.030.804.010

Other non-operating income and gains 17.057.804.651 38.714.163.969

186.696.326.294 415.727.933.326

Non-operating expenses and losses:

Provisions – Inventories (2.966.434.808) (6.950.983.259)

Provisions - Bad debts (42.017.798.300) (89.691.188.349)

Provisions - Legal proceedings (71.082.899) (65.389.055)

Provisions – Tax contingencies (30.826.198.976) (11.066.236.118)

Provisions – Work accidents (240.286) -

Provisions – Other (351.701.451) (3.433.508.761)

Extraordinary amortisations (589.448) -

Losses on fixed assets (231.144.917.485) (197.279.462.101)

Losses on inventories (5.092.348.777) (4.472.060.699)

Bad debts (62.734.390) (47.834.407.663)

Other non-operating expenses and losses (32.390.428.939) (33.107.231.100)

(344.924.475.759) (393.900.467.104)

Adjustments relating to prior years (12.621.421.581) (30.356.046.206)

(170.849.571.046) (8.528.579.984)


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34. EXTRAORDINARY RESULTS

35. INCOME TAX

36. COMMITMENTS NOT REFLECTED IN THE BALANCE SHEET

The table below details the extraordinary results as at 31 December 2017.

The table below details income tax expense as at 31 December 2017.

As at 31 December 2017, the Group assumed commitments not reflected in the ba-lance sheet, the most significant of which are as follows:

• Acquisition of two drilling vessels in the amount of USD 902 million;

• As mentioned in Note 38, the Group has the commitment to pay USD 500 million for the acquisition of participating interests in blocks held by Cobalt;

• Within the terms of the contracts with the Contractor Groups in which the Sonangol Group holds participating interests, the Group has to cover cash calls requested by the operator of the respective blocks.

Items 2017 2016

Extraordinary income and gains

Claims 2.496.953 1.079.742

Other extraordinary income and gains 2.256.302.347 77.393.575

2.258.799.300 78.473.316

2.258.799.300 78.473.316

Items 2017 2016

Oil income tax 61.152.057.652 34.348.193.431

Industrial tax 31.708.122.829 48.952.240.441

Other taxes 929.523.101 767.942.045

93.789.703.582 84.068.375.918

37. CONTINGENCIES

38. SUBSEQUENT EVENTS

In the normal course of the Group’s operations, there are possible risk contingencies of a tax, administrative and labor nature, involving custo-mers, suppliers, tax authorities and employees. Contingencies whose losses were estimated as possible do not require recognition of provisions and are regularly reassessed. The following are the most significant possible contingencies:

PT Venture arbitrationIn 2016, PT Ventures, SGPS, S.A., one of UNITEL’s shareholders, intended an action against the remaining shareholders of Unitel, SA (including Mercury-MSTelecom - Serviços de Telecomuni-cações, S.A.) for an alleged breach of a sharehol-ders’ agreement entered into between the parties, in particular the non-payment of dividends distri-buted in previous periods to that shareholder.

As of 31 December 2017, this civil litigation was being processed in the Arbitral Court of the Inter-national Chamber of Commerce of Paris, being in the final phase of allegations.

It should also be noted that the Defendants filed a counterclaim against PT Ventures SGPS, S.A., in an amount to be determined by the Court, based

After the balance sheet date, the relevant events with potential impacts on the Group’s financial statements were:

Acquisition of participating interests At the end of 2017, the Group concluded an ami-cable settlement with Cobalt International Energy, Inc., terminating the litigation brought by that entity against Sonangol on 8 May 2017.

One of the results of the agreement is the defini-tive transfer of the participating interest held by Cobalt International Energy, Inc. of 40% in each of blocks 20/11 and 21/09 to the Sonangol Group, after the settlement of the last payment, in the amount of USD 500 million. This payment was

on the fair value of the Defendant’s shares in Uni-tel’s, S.A. share capital.

Based on the assessment performed by its legal advisors, namely the fact that an unfavorable ou-tcome was not considered as probable, the Board of Directors classified this proceeding as a con-tingent liability (possible risk), and therefore, no provision was recorded for this proceeding as at 31 December 2017.

Tax contingenciesAs at 31 December 2017, there was a set of pos-sible tax contingencies arising from tax inspec-tions and other events that are in dispute with the State. As mentioned in Note 9.5.1, the recon-ciliation of non-oil debts between the Group and the Ministry of Finance is at its final stage, which should lead to the signature of an agreement on the historical debt position between both parties and the definition of a settlement model for such balances.

made on 11 June 2018, and the transfer of those participating interests to the Sonangol Group was completed on that date.It is also the Board of Directors’ belief that the execution of the business provides many oppor-tunities for the Group, considering the favorable outlook verified in the market and the recently approved legislation on tax and financial terms for the oil concessions (Presidential Legislative Decrees No. 5/18, 6/18 and 7/2018). Air Services On 29 April 2016, an H225 Super Puma helicopter, operated by the company CHC Helicopter Services was involved in a fatal accident in the North Sea (Norway). Due to this accident, the civil aviation


174 175

authorities of Norway and the United Kingdom immediately set up an independent investigation, coordinated by the Accident Investigation Board Norway (AIBN), deciding on the immediate sus-pension of all commercial passenger operations with Super-Puma aircraft (H225 and AS332 L2) in Norway and the United Kingdom, followed by European Union (EASA) and Angolan civil aviation authorities (INAVIC).

According to the AIBN preliminary report, dated 28 April 2017, the accident was due to mechanical issues.

As operator of 16 (sixteen) Super Puma aircraft, of which twelve (12) of the H225 model are owned and four (4) of the AS332 L2 model are owned by third parties, SonAir filled a proceeding on 26 April 2018 before the Commercial Court of Mar-seille claiming a compensation of USD 1,27 billion relating mainly, but not limited to, (i) operating losses due to the lack of helicopter operation, (ii) operating and maintenance costs, insurance and other costs, and (iii) amounts received by Airbus in exchange for the sale of the helicopters. Disposal of the Sonangol P&P Iraque shareholdingIn 2018, Sonangol entered into a Sale and Purcha-se Agreement with the Vertex Capital Investments Group for the sale of a 86% stake in Sonangol P&P Iraque, a company based in the Cayman Islands, which has, through a branch incorporated in Iraq, a participating interest in two oil fields in Iraq. Under this agreement, the Vertex Group will finan-ce all operations, meaning that, Sonangol will be under a full carry scheme. It should also be noted that the agreement provides that Sonangol will be compensated for investments already made to date. The success of this agreement depends on (i) the conclusion of the due diligence carried out by the Vertex Group and (ii) the formal consent by the National Oil Company of Iraq for the transfer of shares. If these conditions are not met, the agree-ment shall be automatically terminated.

Devaluation of the KwanzaIn 2018 there was a very significant devaluation of the exchange rate of the AOA against the USD and against the Euro. In accordance with accounting standards, this situation should be disclosed and not adjusted in the financial statements as at 31 December 2017. If it were an adjustable event, it would have an impact on the measurement of assets and liabilities whose nominal currency is different from AOA.

Air Services – Closure of the US Express route and disposal of aircraftIn the course of 2018, the Board of Directors de-cided to terminate the Houston Express operation as of 29 March 2018 with the consequent disposal of the Boeing 747 aircraft fleet that operated that route.

The Board of Directors believes that the termina-tion of the Houston Express operation does not have impacts on the financial statements as at 31 December 2017, in addition to those already recor-ded and / or disclosed.

Disposal of the participating interests in Blocks 20/11 and 21/09During 2018, the Group submitted a public offer for the partial disposal of the interests held in Blocks 20/11 and 21/09 as well as its position as Operator of those blocks, in order to reduce its exposure and obtain greater operational efficien-cy. At the date of approval of the accounts, the proposals received during the showrooms held in Luanda and Houston-Texas were being assessed, being expected that the sales price will be higher than the participating interests book value in those blocks.

Regeneration ProgramIn 2018, the Board of Directors approved the So-nangol Group Regeneration Program, which recei-ved a positive opinion from the sole shareholder.

Based on the need to make Sonangol more com-petitive and profitable, this program aims to re-generate the Group and maximise the potential of the assets with greater focus on core business and on the primary chain. Accordingly, in 2018, a series of agreements were signed with high reputation entities with the purpose to dinamise the Group, among which we highlight:

• The conclusion of the technical and financial assistance agreement for the refining sector, with the aim of optimising the Luanda Refinery through the installation of the Platforming unit, as well as the provision of technical assistance services to improve the reliability of the production process, its quality and the increase of gasoline production capacity;

• Signature of the Memorandum of Understanding between Sonangol E.P. and the Luxembourg Heli-conia and Canadian CHC Airlines;

• Data showroom for the partial disposal of So-nangol’s participating interests in Blocks 20/11 and 21/09 as well as its position as Operator;

• Signing of the agreement with the Norwegian Petroleum Operator Equinor (Statoil), which un-dertakes the commitment of developing greater cooperation in the management, logistics, scienti-fic, research, development and operation fields in the oil industry;

• The signature of an agreement with Total E&P Angola for the supply of gasoline to the domestic market.

It is the Board of Directors’ belief that the implementation of the above agreements brings new opportunities for the Group ensuring greater return to the Shareholder.

39. GOVERNMENT AND OTHER ENTITIES GRANTS

40. BALANCES AND TRANSACTIONS WITH RELATED PARTIES

In 2017, the Group did not received any grants from the Government or other entities.

Balances and transactions with related parties were eliminated in the consolidation process, therefore there were no outstanding balances and transactions as at 31 De-cember 2017.


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41. INFORMATION REQUIRED BY LAW

42. FINANCING GUARANTEES

43. EXPLANATION ADDED FOR TRANSLATION

No information required by law.

Sonangol EP is the guarantor of external financing of the Republic of Angola with international financial institutions. These guarantees are based on contractually defined quantities of future crude oil sales.

These financial statements are a free translation of the financial statements origi-nally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails.


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