Kristian Johansen Sven Børre Larsen
Q2 2016 Earnings Release
CEO CFO 4 August 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
2
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Q2 net revenues of 114 MUSD compared to 140 MUSD in Q2 2015 Net late sales of 84 MUSD, up 4% from 82 MUSD in Q2 2015
Net pre-funding revenues of 26 MUSD were down 50% from Q2 2015, funding 42% of TGS’ operational multi-client investments for the quarter (62 MUSD)
Improved performance in Q2 2016 compared to preceding quarters as oil companies willingness to invest in seismic data has improved slightly
Operating profit for the quarter was 22 MUSD compared to 36 MUSD in Q2 2015 Personnel and other operating costs reduced by 25% (30% excluding restructuring costs
and impairments) from Q2 2015
Cash flow from operations was 9 MUSD compared to 86 MUSD in Q2 2015 Cash balance of 162 MUSD at 30 June 2016 in addition to undrawn 75 MUSD Revolving
Credit Facility
Quarterly dividend maintained at USD 0.15 per share
Q2 2016 Highlights
3
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Revolution XII and XIII 7,150 km2 (306 blocks) multi-client 3D survey in
collaboration with WesternGeco Located in Green Canyon, Atwater Valley and
Ewing Bank protraction areas of the Central Gulf of Mexico
Survey will utilize WesternGeco’s proprietary Q-Marine* point-receiver marine seismic system combined with the proprietary multi-vessel, Dual Coil Shooting acquisition technique, which will provide broadband, long-offset, full-azimuth data
Track record of success in Central GOM Expansion of TGS-WesternGeco WAZ surveys
in U.S Central GOM; first survey Freedom was acquired in 2008
WAZ data has proven critical to improve illumination and imaging of the sub-salt and other complex geologic features
This part of the Gulf of Mexico continues to see the highest activity level and benefits from significant near-term lease turnover
New Project Announced – U.S. Gulf of Mexico
*Mark of Schlumberger
4
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
5
Operational Highlights
©2015 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Q2 2016 Operations
6
Harrier Explorer 2D
Sanco Swift 2D JV
Fugro Multibeam x2
Northern Explorer 2D
Aquila Explorer 2D
Hawk Explorer 2D
TDI Brooks Coring
Atlantic Explorer 2D JV
BGP Explorer 2D
Artemis Atlantic P-Cable
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Gigante 2D – 186,000 km multi-client 2D survey Regional 2D survey commenced in Q2 2015 and
expected to complete in early Q4 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 160,000 km of 2D data acquired at end Q2 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 More than 50% of data acquired at end Q2 2016 Interpretation of data will integrate with the 2D
seismic survey and enhance the value proposition to clients
Q2 Activity – Mexico
7
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Newfoundland Labrador 2016 Season 36,000 km multi-client 2D survey in partnership
with PGS – commenced in Q2 2016 2,000 km2 multi-client 3D survey in partnership
with PGS – will commence in Q3 2016 TGS-PGS JV library in this region will exceed
148,000 km of 2D data and 11,000 km2 of 3D data in addition to 83,700 km of TGS vintage data, an expansive well log library and advanced multi-client interpretation products
A bright spot in an otherwise challenging exploration market 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)
Q2 Activity – East Canada
8
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Q2 Activity – Australia and Europe
9
Northwest Shelf Renaissance - 8,000km multi-client 2D survey Long offset, broadband 2D seismic data as well
as magnetic and gravity data Designed to provide enhanced imaging through
to the deeper stratigraphic section of the Dampier, Beagle and Bedout Sub Basins and Exmouth Plateau
Ties recent and deep wells with TGS' existing 3D coverage in the Carnarvon Basin
Traverses the proposed 2016 Australian Offshore Petroleum Exploration Acreage Release areas
Fast track data will be available November 2016 with the final data available Q2 2017
Europe – proprietary P-Cable survey Proprietary P-Cable survey in Barents Sea Builds on TGS’ experience with multi-client P-
Cable acquisition in the Barents Sea Acquisition is expected to complete during Q3
2016.
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
R360 Modern eCommerce tool to enable simpler
integration of geologic data with customer systems
Allows clients to perform data reconnaissance, identification and selection through a map-based interface with purchase and data delivery online
Digital Petrodata GEONEWS Provides E&P, financial and investment
community professionals with a quick and easy way to access pertinent and timely oil & gas industry data
Deep tagging of articles allows creation of very focused queries and email alerts
Data is spatially located with detailed attributes and analysis functionality
TGS Launches New Digital Information Products
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Please visit www.tgs.com for a free trial of GEONEWS!
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
11
Financials
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
9 9
6 5 5 5 3 3
0
2
4
6
8
10
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Proprietary revenues
130
226
72 82 90 90 38
84
0
50
100
150
200
250
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Late sales revenues
3% Y/Y
51 62
94
53 74
37 23 26
0
20
40
60
80
100
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Prefunding revenues
190
298
172 140 169 132
64 114
0
50
100
150
200
250
300
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Total revenues
Net Revenues
12
-50% Y/Y
-33% Y/Y -18% Y/Y
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
NSA 51%
Europe 19%
AMEAP 16%
Other 14%
Q2 2015
NSA 52%
Europe 27%
AMEAP 9%
Other 12%
Q2 2016
Net Revenue Breakdown
2D 15%
3D 75%
GPS 10%
Q2 2015
2D 48%
3D 42%
GPS 10%
Q2 2016
13
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
32 37
25 24 22 28
18 17
05
10152025303540
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Operating expenses *
-30% Y/Y
* Include personnel costs and other operating expenses. Adjusted for restructuring costs and larger impairments of operating items
81 143
105 74 99
230
62 69
0
50
100
150
200
250
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Amortization and impairment *
84 15
110
-76
49 -20
63
-35
-100
-50
0
50
100
150
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Free cash flow *
Operating Expenses, EBIT, Free Cash Flow
14
62% - rate
71 111
37 38 46 31
-19 24
-40%
-20%
0%
20%
40%
60%
-40-20
020406080
100120
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
EBIT *
EBIT EBIT Margin
* Q1 and Q2 2016 reflects the new amortization policy effective from 1 January 2016
* Earnings before interest and taxes and excluding larger impairments and restructuring costs
* Defined as cash flow from operational activities minus operational cash investments in multi-client projects
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
837 818 876
919 976
839 830 823
700
750
800
850
900
950
1,000
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Multi-client library - NBV
93 126
163 116 135
88 53 62
0%10%20%30%40%50%60%70%80%90%100%
0
50
100
150
200
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Pref
undi
ng ra
tio
Ope
ratio
nal i
nves
tmen
ts
Operational investments and prefunding ratio
Operational investments Prefunding ratio
Multi-client library
15
17%
1% 4%
8%
17%
1%
52%
0% 0% 7%
19% 21%
9%
44%
0%
10%
20%
30%
40%
50%
60%
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
122
451
0
100
200
300
400
500
600
700
2012 2013 2014 2015 2016 YTD WIP
Original investments Net Book Value
20 %
34%
52% 22%
1% 14%
70%
Investments – year of completion
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Q2 2016 Income Statement
16
USD million, except EPS Q2 2016 Q2 2015 Change in %Net revenues 114 140 -18%Cost of goods sold – proprietary and other 0.8 0.1 1435%
Amortization of multi-client library 62% 69 74 -6%
Gross margin 44 66 -33%Personnel costs 11 17 -37%
Other operating expenses 9 9 -3%
Cost of stock options 0.3 0.9 -61%
Depreciation 3 3 -7%
Operating profit 19% 22 36 -39%Net financial items -0.3 2 -116%Profit before taxes 19% 21 37 -43%Taxes 5 13 -65%
Net Income 15% 17 24 -31%EPS, Undiluted 0.17 0.24 -29%
EPS, Fully Diluted 0.17 0.24 -29%
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Q2 2016 Cash Flow Statement
17
USD million Q2 2016 Q2 2015 Change in %Received payments from customers 28 141 -80%
Payments for operational expenses (19) (25) 25%
Paid taxes - (29) 100%
Operational cash flow 9 86 -89%Investments in tangible and intangible assets (1) (3) 57%
Investments in multi-client library (44) (162) 73%
Interest received 0.3 2 -82%
Interest paid (0.3) (0.003) -10467%
Dividend payments (14) (99) 86%
Proceeds from share issuances 2 0.03 5271%
Change in cash balance -48 -175 73%
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Balance Sheet
The Company holds no interest-bearing debt
USD million Q2 2016 Q1 2016 Change in % Q4 2015AssetsCash and cash equivalents 162 210 -23% 163Other current assets 255 189 35% 308Total current assets 417 399 5% 471Intangible assets and deferred tax asset 92 92 0% 90Other non-current assets 16 16 3% 25Multi-client library 823 830 -1% 839Fixed assets 26 28 -7% 30Total Assets 1,375 1,364 1% 1,455LiabilitiesCurrent liabilities 171 168 2% 218Non-current liabilities 4 5 -9% 6Deferred tax liability 33 29 14% 33Total Liabilities 208 201 3% 257Equity 1,167 1,163 0% 1,198Total Liabilities and Equity 1,375 1,364 1% 1,455
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©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Dividend stable at USD 0.15 per share
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 paid on 1 June 2016 Q3 2016: USD 0.15 per share dividend to be paid on 25 August 2016 (shares will trade ex-dividend on
11 August 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 Q3
3.7% 3.6% 4.0% 3.9%
4.9% 5.2%
3.9%
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.
20
Outlook
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
E&P spending likely to decline 20-30% this year While seeing some signs of improvement in oil companies’ willingness to invest in seismic
data during Q2 2016, the market is expected to remain challenging in the near term Seismic data is largely a type of discretionary spending that oil companies can quickly turn
on and off depending on prevailing strategies and market conditions High variability of seismic spending between quarters and across regions is expected to
continue going forward
Challenging Market for Exploration
21
Source: SEB Research Source: SEB Research
-8%
-12%
-18% -19% -20% -20%
-25% -27% -27% -27% -27%
-29% -35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
Aug15
Sep15
Oct15
Nov15
Dec15
Jan16
Feb16
Mar16
Apr16
May16
Jun16
Jul16
Grow
th (%
)
Development in 2016 E&P Spending Estimate
7%
16% 23%
4%
-26%
8% 16%
4%
13% 12% 20%
25%
14% 18%
-8%
13% 16% 14% 8%
3%
-25% -29%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Chan
ge ye
ar-o
n-ye
ar (%
)
Change in Global E&P Spending
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
License Round Activity and TGS Positioning
22
Europe / Russia • Norway APA – Sep 2016 (bids due) • Norway 23rd Round – May 2016 (blocks awarded) • UK 29th Round – Oct 2016 (bids due) • Greenland – Dec 2016, 2017, 2018 (bids due)
Africa, Middle East, Asia Pacific • Ongoing uncertainty on timing of African
licensing rounds • Australia – Q3 2016 (2016 round launch) • New Zealand – Sep 2016 (bids due) • Indonesia – Aug & Oct 2016 (bids due)
North & South America • Central GOM – Mar 2017 (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 - Mid-2017 • Mexico – Round 1(L04) in Dec 2016, Round 2 announced for 2017,
2 more rounds proposed by 2019
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Backlog
153 143 146 178
281
213 260
293
193 182 145 125
185 224 242
103
0
50
100
150
200
250
300
350
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Historical Backlog (MUSD) 2012 - 2016
23
©2015 TGS-NOPEC Geophysical Company ASA. All rights reserved.
2016 Projects Schedule Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Akademik Lazarev
Aquila Explorer
Hawk Explorer
Osprey Explorer
Northern Explorer
Harrier Explorer
Fugro Multibeam
TDI Brooks Coring
Sanco Spirit
Atlantic Explorer
BGP Explorer
Artemis Atlantic P-Cable
Greenland
Mexico
2D &
Oth
er
EUR AMEAP NSA
24
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Ramform Sterling
WesternGeco Coil Crew
3D Canada JV
Mexico
24
Canada JV
Canada JV
Canada Crew
Land
Chickadee
Australia
Norway (Proprietary)
GOM
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
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
TGS Strategy: Cost efficient, focused and quickly reacting!
25
-40
-35
-30
-25
-20
-15
-10
-5
0Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16
MU
SD
Personnel and other operating costs*
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
* Adjusted for restructuring costs and larger impairments of operating items
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Summary Q2 net revenues of 114 MUSD Q2 operational investment of 62 MUSD (42% pre-funded) Q2 operating profit of 22 MUSD Cash balance of 162 MUSD in addition to undrawn 75 MUSD Revolving Credit Facility Quarterly dividend maintained at USD 0.15 per share
Despite seeing some signs of improvement in oil companies’ willingness to invest in seismic data during Q2 2016, the market is expected to remain challenging and volatile 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
Updated 2016 guidance: New operational multi-client investments of approximately 230 MUSD
Additional multi-client investments expected from sales of existing surveys with risk sharing arrangements
Multi-client investments are expected to be prefunded 40% to 45%
26
Thank you
©2016 TGS-NOPEC Geophysical Company ASA. All rights reserved.
www.tgs.com