Kristian Johansen Sven Børre Larsen
Q1 2016 Earnings Release
CEO CFO 21 April 2016
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
All statements in this presentation other than statements of historical fact, are forward-looking statements, which are subject to a number of risks, uncertainties, and assumptions that are difficult to predict and are based upon assumptions as to future events that may not prove accurate. These factors include TGS’ reliance on a cyclical industry and principal customers, TGS’ ability to continue to expand markets for licensing of data, and TGS’ ability to acquire and process data products at costs commensurate with profitability. Actual results may differ materially from those expected or projected in the forward-looking statements. TGS undertakes no responsibility or obligation to update or alter forward-looking statements for any reason.
Forward-Looking Statements
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©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Q1 net revenues of 64 MUSD compared to 172 MUSD in Q1 2015 Net late sales of 38 MUSD, down 47% from 72 MUSD in Q1 2015
Net pre-funding revenues of 23 MUSD were down 76% from Q1 2015, funding 43% of TGS’ operational multi-client investments for the quarter (53 MUSD)
Operating profit for the quarter was -21 MUSD compared to 37 MUSD in Q1 2015 Reflects the new amortization policy for seismic surveys effective from 1 January 2016
Personnel and other operating costs reduced by 28% from Q1 2015 (adjusted for 2.1 MUSD non-recurring severance costs)
Cash flow from operations was 145 MUSD compared to 260 MUSD in Q1 2015 Free cash flow (after operational investments) of 63 MUSD
Cash balance of 210 MUSD at 31 March 2016 in addition to undrawn 75 MUSD Revolving Credit Facility
Quarterly dividend maintained at USD 0.15 per share (subject to renewal of the Board authorization at AGM on 10 May 2016)
Q1 2016 Highlights
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4
Operational Highlights
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Q1 2016 Operations
Alberta Crew
5
Harrier Explorer 2D
Osprey Explorer 2D
Fugro Multibeam
Northern Explorer 2D
Aquila Explorer 2D
Hawk Explorer 2D
TDI Brooks Coring
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A consortium comprising TGS, PGS and Schlumberger WesternGeco won the tender for the rights to undertake the first multi-client seismic program offshore Sabah, Malaysia
Number of proven hydrocarbon accumulations with exploration and drilling progressing into deeper frontier waters
This large basin will benefit from modern, high resolution broadband seismic acquisition and processing technologies necessary to understand both the existing play concepts and new potential plays
Q1 Activity – Asia Pacific
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Offshore Malaysia - Award of Permit
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Full-azimuth multi-component (3C-3D) data
Eastwards expansion of TGS’ successful Kaybob-Bigstone surveys in the Duvernay fairway, West Central Alberta
Building on track record with clients and extending TGS’ dominance in area of high activity
Acquisition completed in Q1 2016
Q1 Activity – North America Onshore
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Chickadee – 206 km2 3D multi-client survey
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Gigante 2D – 186,000 km multi-client 2D survey Regional 2D survey commenced in Q2 2015 and
expected to complete in late Q3 2016 Survey covers the proposed license rounds in the
Perdido, Campeche and Mexican Ridges regions Line ties will be made to the US Gulf of Mexico
regional grids previously acquired by TGS More than 120,000 km of 2D data acquired at end
Q1 2016 with a significant amount of fast-track data already delivered to clients
Gigante Multibeam, Coring, and Geochemical Surveys 600,000 km2 survey commenced in 2015 and
expected to complete in Q4 2016 Interpretation of data will integrate with the 2D
seismic survey and enhance the value proposition to clients
Q1 Activity – Mexico
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Financials
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
8 9 9
6 5 5 5 3
0
2
4
6
8
10
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Proprietary revenues
137 130
226
72 82 90 90 38
0
50
100
150
200
250
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Late sales revenues
-47% Y/Y 60 51 62
94
53 74
37 23 0
20
40
60
80
100
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Prefunding revenues
205 190
298
172 140 169 132
64 0
50
100
150
200
250
300
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Total revenues
Net Revenues
10
-76% Y/Y
-45% Y/Y -63% Y/Y
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
NSA 33%
Europe 11%
AMEAP 42%
Other 13%
Q1 2015
NSA 57%
Europe 18%
AMEAP 5%
Other 21%
Q1 2016
Net Revenue Breakdown
2D 16%
3D 74%
GPS 10%
Q1 2015
2D 51%
3D 33%
GPS 16%
Q1 2016
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©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
32 32 37
25 26 22 28
18
05
10152025303540
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Operating expenses *
-28% Y/Y
* Include personnel costs and other operating expenses. Adjusted for non-recurring items.
85 81 143
105 74 99
230
62
0
50
100
150
200
250
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Amortization and impairment *
-27
84 15
110
-76
49 -20
63
-100
-50
0
50
100
150
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Free cash flow
Operating Expenses, EBIT, Free Cash Flow
12
102% - rate
82 71 111
37 36 46 31 -19
-40%
-20%
0%
20%
40%
60%
-40-20
020406080
100120
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
EBIT before non-recurring items
EBIT EBIT Margin
* Q1 2016 reflects the new amortization policy effective from 1 January 2016
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
829 837 818 876
919 976
839 830
700
750
800
850
900
950
1,000
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Multi-client library - NBV
114 93
126 163
116 135
88 53
0%10%20%30%40%50%60%70%80%90%100%
0
50
100
150
200
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Pref
undi
ng ra
tio
Ope
ratio
nal i
nves
tmen
ts
Operational investments and prefunding ratio
Operational investments Prefunding ratio
Multi-client library
13
16%
3% 6%
3% 7%
1%
64%
0% 1%
8%
21% 22%
5%
44%
0%
10%
20%
30%
40%
50%
60%
70%
Fullyamortized
2012 2013 2014 2015 2016 YTD WIP
Net revenues Net book value
Net revenues vs net book value – year of completion
270
381
609
427
59
457
0
100
200
300
400
500
600
700
2012 2013 2014 2015 2016 YTD WIP
Original investments Net Book Value
20 %
37%
59%
24%
2% 16%
69%
Investments – year of completion
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Q1 2016 Income Statement
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USD million, except EPS Q1 2016 Q1 2015 Change in %Net revenues 64 172 -63%Cost of goods sold – proprietary and other 0.01 0.5 -97%
Amortization of multi-client library 102% 62 105 -41%
Gross margin 2 67 -97%Personnel costs 13 17 -20%
Other operating expenses 7 9 -18%
Cost of stock options 0.05 0.5 -91%
Depreciation 3 4 -16%
Operating profit -33% -21 37 -157%Net financial items 1 -1 175%Profit before taxes -32% -20 36 -156%Taxes -0.1 7 -102%
Net Income -32% -20 29 -170%EPS, Undiluted -0.20 0.28 -171%
EPS, Fully Diluted -0.20 0.28 -171%
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Q1 2016 Cash Flow Statement
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USD million Q1 2016 Q1 2015 Change in %Received payments from customers 175 337 -48%
Payments for operational expenses (27) (31) 14%
Paid taxes (3) (45) 93%
Operational cash flow 145 260 -44%Investments in tangible and intangible assets (3) (2) -17%
Investments in multi-client library (82) (151) 46%
Payments made to acquire debt instruments - (5) N/A
Interest received 0.3 2 -86%
Interest paid (0.01) (0.02) 56%
Dividend payments (15) - N/A
Purchase of treasury shares - (5) N/A
Proceeds from share issuances 0.1 2 -91%
Change in cash balance 45 101 -55%
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Q1 2016 Balance Sheet
The Company holds no interest-bearing debt
USD million Q1 2016 Q4 2015 Change in %AssetsCash and cash equivalents 210 163 29%Other current assets 189 308 -39%Total current assets 399 471 -15%Intangible assets and deferred tax asset 92 90 2%Other non-current assets 16 25 -37%Multi-client library 830 839 -1%Fixed assets 28 30 -7%Total Assets 1,364 1,455 -6%LiabilitiesCurrent liabilities 168 218 -23%Non-current liabilities 5 6 -22%Deferred tax liability 29 33 -12%Total Liabilities 201 257 -22%Equity 1,163 1,198 -3%Total Liabilities and Equity 1,364 1,455 -6%
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©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Strong Cash Generation Delivers Shareholder Value
Shareholder authorization to distribute quarterly dividend payments from Q1 2016 Aim to keep a stable quarterly dividend through the year Actual quarterly dividend level paid will be subject to continuous evaluation of market outlook,
cash flow expectations and balance sheet development
Q1 2016: USD 0.15 per share dividend paid on 23 February 2016 Q2 2016: USD 0.15 per share dividend subject to a renewal of the Board’s authorization to distribute
quarterly dividends at the AGM on 10 May 2016. The share is expected to trade ex-dividend on 18 May 2016 with payments due on 1 June 2016
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4 NOK
5 NOK 6 NOK
8 NOK 8.5 NOK 8.5 NOK
USD 0.15 per Quarter
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2010 2011 2012 2013 2014 2015 2016*
USD
per
sha
re
Year of Payment *Quarterly Dividends, defined in USD from 2016 Historical NOK dividends converted to USD using FX rate on ex-dividend date
Q1
Q2
3.7% 3.6% 4.0% 3.9%
4.9% 5.2%
4.1%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2010 2011 2012 2013 2014 2015 2016*
Yiel
d (o
n da
y of
ann
ounc
emen
t)
Year of Payment
Dividend Paid* (2010 – 2016) Dividend Yield (2010 – 2016)
*2016 Dividend Yield annualized based on the weighted yield at the time of announcement of quarterly dividends
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
18
Outlook
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E&P spending likely to decline 20-30% this year There are currently few tangible signs that a recovery is imminent and the market for
seismic data is likely to remain weak in 2016 Oil companies are likely to prioritize their seismic spend in areas with more favorable
economics and payback times as well as areas where they have current work programs and license obligations
This could result in greater variability of seismic spend between quarters and across regions in the near term
Challenging Market for Exploration
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Source: SEB Research
7%
16% 23%
4%
-26%
8%
16%
4%
13% 12%
20% 25%
14% 18%
-8%
13% 16% 14%
8% 3%
-25% -27% -30%
-20%
-10%
0%
10%
20%
30%
Chan
ge ye
ar-o
n-ye
ar (%
)
Change in Global E&P Spending
-8%
-12%
-18% -19% -20% -20%
-25% -27% -30%
-25%
-20%
-15%
-10%
-5%
0%
Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16
Grow
th (%
)
Estimated change in Global E&P spending 2016
Source: SEB Research
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
License Round Activity and TGS Positioning
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Europe / Russia • Norway APA – Sep 2016 (bids due) • Norway 23rd Round – Mid 2016 (awards due) • UK 29th Round – Q4 2016 (expected) • Greenland – Dec 2016, 2017, 2018 (bids due)
Africa, Middle East, Asia Pacific • Ongoing uncertainty on timing of African
licensing rounds • Australia – Jun 2016 (2016 round launch) • New Zealand – Sep 2016 (bids due) • Indonesia – 2016 (bids due)
North & South America • Central GOM – Mar 2016 (5-Year Plan) • Western GOM – Aug 2016 (5-Year Plan) • Newfoundland & Labrador – Nov 2016 (Scheduled Land Tenure) • Nova Scotia – Q4 2016 (3-Year Rolling Plan) • Canada Onshore – at least monthly • Brazil - next round expected 2016/17 • Mexico – Round 1(L04) in Dec 2016, 3 more rounds proposed by 2019
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Prolific offshore area with recent exploration success
Highly successful 2015 license round (nine companies participated with CAD 1.2 billion successful commitments)
Two 2016 Calls for Bids issued over approximately 3.3 million hectares in Jeanne d’Arc and Eastern Newfoundland regions
Bids due 9 November 2016 The modern TGS-PGS JV library in
this region exceeds 112,000 km of 2D data and 9,172 km2 of 3D data in addition to 83,700 km of TGS vintage data
Newfoundland Labrador Call for Bids
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Backlog
188 153 143
185 178
281 224
260 293
242
182 145 146
213 193 125
0
50
100
150
200
250
300
350
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Historical Backlog (MUSD) 2012 - 2016
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2016 Projects Schedule Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Akademik Shatskiy
Aquila Explorer
Hawk Explorer
Osprey Explorer
Northern Explorer
Harrier Explorer
Fugro Multibeam
TDI Brooks Coring
Greenland
Mexico
2D &
Oth
er
EUR AMEAP NSA
23
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Canada Crew
Land
Chickadee
Mexico
23
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Flexible business model with counter-cyclical qualities
Oil price • Down ~60% since summer
of 2014 Oil company returns(1)
• Only ~1% in 2015 • Down ~16%-points since
peak in 2011 E&P spending • Down 20-30% in 2015 • Expected down another
20-30% in 2016
TGS late sales • 47% down in 2015 • 47% down y/y in Q1 16
TGS prefunding revenue(2)
• Expected down ~60% in 2016
Vessel day rates • Down 50% last three years
Risk mitigation • Vessel owners accepting
turnkey contracts • Risk sharing with vessel
owners
TGS cash opex • Run-rate down ~25% y/y
as a result of cost cuts TGS investments(2)
• Expected down almost 60% in 2016
TGS cash tax • Significantly reduced as a
result of weak P&L results
Cash inflow Cash outflow
1. Source: Nordea. Average of 10 large integrated oil companies 2. Based on TGS guidance: 2016 MC investments of approximately MUSD 220, prefunding of 45-50%
Resilient cash flow profile in weak markets
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Investment focus in areas of low break even oil price, fast payback and client activity Payback time combined with break-even oil price highlights regions that E&P
companies will likely prioritize when oil price starts to materially recover TGS will maintain a clear portfolio strategy with strict minimum targets for prefunding
and expected returns
Fast and flexible track record, reacting quickly to seize advantage Maintain focus on core business React quickly to size the company to the level of business activity Ongoing initiative to further reduce number of management layers Reward structure drives strong alignment between company and employees
TGS Strategy: Cost efficient, focused and quickly reacting!
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Energy Starts with Us! TGS will be THE leading energy information company with the BEST
people, quality and service!
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Summary Q1 net revenues of 64 MUSD Q1 operational investment of 53 MUSD (43% pre-funded) Q1 operating loss of 21 MUSD Cash flow from operations of 145 MUSD driving increase in cash balance to 210 MUSD Quarterly dividend maintained at USD 0.15 per share (subject to renewal of the Board
authorization at AGM on 10 May 2016) Challenging seismic market continues with further reductions in oil company spending
Oil companies are likely to prioritize their seismic spend in areas with more favorable economics and payback times as well as areas where they have current work programs and license obligations
This could result in greater variability of seismic spend between quarters and across regions in the near term
However, long-term future of asset-light, focused multi-client business remains strong Cost control, disciplined counter-cyclical investment and balance sheet strength positions TGS to
enhance its leading position
Guidance for 2016 remains unchanged: TGS expects multi-client investments of approximately 220 MUSD
Multi-client investments are expected to be prefunded 45% to 50%
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Thank you
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www.tgs.com