Q3 2017 Earnings Release Reports/Quarterly Earnings/2017 Q3 Earnings...Q3 2017 Highlights • Q3 net...

Kristian Johansen Sven Børre LarsenCEO CFO26 October 2017

Q3 2017 Earnings Release

Forward-Looking Statements

2

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.

©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved

Q3 2017 Highlights

• Q3 net revenues of 142 MUSD, up 25% from Q3 2016• Net late sales of 79 MUSD, up 18% from 67 MUSD in Q3 2016

• Net pre-funding revenues of 62 MUSD were up 58% from Q3 2016, funding 54% of TGS’ operational multi-client investments for the quarter

• Operational multi-client investments of 114 MUSD in addition to 1 MUSD from risk sharing arrangements

• Operating profit for the quarter was 26 MUSD compared to 11 MUSD in Q3 2016

• Cash flow from operations at 86 MUSD compared to 91 MUSD in Q3 2016• Cash balance of 205 MUSD in addition to undrawn 75 MUSD Revolving Credit Facility

• Quarterly dividend maintained at USD 0.15 per share

3©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved

Operational Highlights

Q3 2017 Operations


Atlantic Explorer JV

TDI Brooks Coring

Polarcus Alima

Polar Duchess

Polarcus Asima

Polar Empress

Polar Marquis

Ramform Tethys JV

SCOOP/STACK Crew

Permian Crew

Ramform Titan JV

Ramform Sterling JV

Q3 Activity – U.S. Gulf of Mexico

Fusion M-WAZ reimaging program• M-WAZ reimaging program in collaboration with Schlumberger in

Mississippi Canyon, Atwater Valley and Ewing bank areas• ~27,000 km2 (1,166 OCS blocks ) 3D M-WAZ data previously

acquired by TGS and Schlumberger between 2008 and 2012• Reimaging is >70% complete with final data delivery mid-2018

Otos multibeam and seep study• ~289,000 km2 multibeam acquisition completed in early Q2;

acquisition of 350 cores and associated advanced geochemistry analysis will complete in Q4

• Designed to mirror the successful Gigante multibeam and seep study in the Mexican GOM


Q3 Activity – East Canada

Newfoundland Labrador 2D – 2017 Season• 22,000 km multi-client 2D survey infilling and extending existing JV*

data in the region; targeting 2019 and 2020 Sectors of the Scheduled Land Tenure

Newfoundland Labrador 3D

• ~18,000 km2 multi-client 3D covering a mix of held and open acreage within the 2018 and 2019 Sectors of the Scheduled Land Tenure

• Long Range 3D• East Flemish Pass 3D Phase II• Harbour Deep 3D• Cape Broyle 3D

Well positioned for future licensing rounds• Following the most active year ever in this region, the TGS/PGS JV

library will exceed 175,000 km of 2D data and 29,250 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


* In JV with PGS

Q3 Activity – Norway

AM17 Atlantic Margin 3D• 40,000 km2 project in the central-southern Norwegian Sea – largest 3D

survey carried out by any company in Northern Europe

• Covers largely open blocks in a relatively under-explored area with limited drilling to date

• Several underlying blocks included in the 24th licensing round

• Acquisition in 2017 and 2018

Carlsen 3D • 5,490 km2 multi-client survey located in the Southwest Barents Sea

• Open acreage with blocks included in the 24th licensing round

• Acquisition completed in Q3 2017


Q3 Activity – Ireland

Crean 3D - Ireland• ~5,400 km2 multi-client survey located in the South Porcupine

Basin between the Porcupine High and the Irish Mainland Platform

• Adding to TGS’s Atlantic Margin offering – building on the exploration success on the Newfoundland Labrador conjugate margin coupled with historical exploration in Atlantic Ireland

• Acquisition completed in October 2017


Q3 Activity - U.S. Land

West Kermit 3D• 1,050 km2 high-resolution 3D multi-client project in Loving and Winkler

counties, TX, in the Delaware basin

• Data acquisition expected to complete in Q4 2017

Geary 3D• 200 km2 high-resolution 3D multi-client project in the SCOOP & STACK

play in the Anadarko Basin, OK

• Data acquisition expected to complete in Q4 2017

Permian Well Database• Comprehensive Permian well database announced to clients in Q1 2017

• Expanded to ~460,000 wells in Q3 2017 (including validated well headers and digital LAS) supported by multiple interpretive products


Financials

53 3

7

3 2 2 10

2

4

6

8

10

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Proprietary revenues

90

38

8467

145

69 79 79

020406080

100120140160

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Late sales revenues

18% Y/Y

3723 26

39

17 15 27

62

0

20

40

60

80

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Prefunding revenues

13264

114 113165

86 108142

0

50

100

150

200

250

300

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Total revenues

12

Net Revenues

58% Y/Y

-82% Y/Y

25% Y/Y


NSA56%

Europe29%

AMEAP4%

Other11%

Q3 2016

NSA39%

Europe40%

AMEAP13%

Other8%

Q3 2017

2D17%

3D76%

GPS7%

Q3 2017

13

Net Revenue Breakdown

2D48%

3D43%

GPS9%

Q3 2016


230

62 69 74 92 62 69 95

0

50

100

150

200

250

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Amortization and impairment

-20

63

-35

29 33

74

12-19

-50

0

50

100

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Free cash flow *

14

Operating Expenses, EBIT, Free Cash Flow

67% - rate

31

-19

2411

45

217 26

-40%

-20%

0%

20%

40%

-30-20-10

01020304050

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

EBIT *

EBIT EBIT Margin* 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


28

18 17 2024

19 19 19

0

5

10

15

20

25

30

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Operating expenses *

-4% Y/Y

* Include personnel costs and other operating expenses. Adjusted for restructuring costs and larger impairments of operating items

839 830 823 816 812 820 812 838

0100200300400500600700800900

1,000

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Multi-client library - NBV

8851 59 64

46 58 59

114

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

0

50

100

150

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Pref

undi

ng ra

tio

Ope

ratio

nal i

nves

tmen

ts

Operational investments* and prefunding ratio

Operational investments Prefunding ratio

15

Multi-Client Library

9%4%

13%

2%9%

5%

59%

0%3%

8%12%

15%19%

44%

0%

10%

20%

30%

40%

50%

60%

70%

Fullyamortized

2013 2014 2015 2016 2017 WIP

Net revenues Net book value

Net revenues vs net book value – year of completion

381

609

427

252 243

454

0

100

200

300

400

500

600

700

2013 2014 2015 2016 2017 WIP

Original investments Net Book Value

20 %

43%58%

21%5%

9%

72%

Investments – year of completion


*Operational investments excluding risk-sharing arrangements

USD million, except EPS Q3 2017 Q3 2016 Change in %Net revenues 142 113 25%Cost of goods sold – proprietary and other 0.2 5 -97%

Amortization of multi-client library 67% 95 74 27%

Gross margin 47 34 38%Personnel costs 13 12 10%

Other operating expenses 6 8 -23%

Cost of stock options 0.1 0.2 -75%

Depreciation 2 3 -37%

Operating profit 18% 26 11 140%Net financial items 1 2 -48%Profit before taxes 19% 27 13 108%Taxes 18 11 56%

Net Income 7% 9 2 441%EPS, Undiluted 0.09 0.02 441%

EPS, Fully Diluted 0.09 0.02 441%

16

Q3 2017 Income Statement


USD million Q3 2017 Q3 2016 Change in %Received payments from customers 115 110 4%

Payments for operational expenses (26) (25) -4%

Paid taxes (2) 6 -141%

Operational cash flow 86 91 -6%Investments in tangible and intangible assets (1) (2) 15%

Investments in multi-client library (105) (62) -69%

Interest received 0.8 0.7 18%

Interest paid (0.04) (0.03) -52%

Dividend payments (15) (17) 9%

Proceeds from share issuances - - N/A

Change in cash balance -35 11 -411%

17

Q3 2017 Cash Flow Statement


USD million Q3 2017 Q2 2017 Change in % Q4 2016AssetsCash and cash equivalents 205 239 -14% 191Other current assets 272 268 1% 353Total current assets 477 508 -6% 544Intangible assets and deferred tax asset 82 84 -2% 86Other non-current assets 0.5 2 -73% 11Multi-client library 838 812 3% 812Fixed assets 21 21 -3% 23Total Assets 1,418 1,426 -1% 1,477LiabilitiesCurrent liabilities 223 227 -2% 262Non-current liabilities 5 5 -8% 6Deferred tax liability 33 33 -1% 39Total Liabilities 261 265 -2% 307Equity 1,157 1,161 0% 1,169Total Liabilities and Equity 1,418 1,426 -1% 1,477

Balance Sheet


Dividend stable at USD 0.15 per share

• Shareholder authorization to distribute quarterly dividend payments• 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

• Q4 2017: USD 0.15 per share to be paid on 16 November 2017 • Shares will trade ex-dividend on 2 November 2017


5 NOK6 NOK

8 NOK 8.5 NOK

8.5 NOK

USD 0.15per Quarter

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

2011 2012 2013 2014 2015 2016 2017*

USD

per

sha

re

Year of Payment*Quarterly Dividends, defined in USD from 2016Historical NOK dividends converted to USD using FX rate on ex-dividend date

Q1

Q2

Q3

Q4Q4

Q1

Q3

Q2

3.7% 3.6%4.0% 3.9%

4.9%5.2%

3.6%

2.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2010 2011 2012 2013 2014 2015 2016* 2017*

Yiel

d (o

n da

y of

ann

ounc

emen

t)

Year of Payment

Dividend Paid* (2010 – 2017) Dividend Yield (2010 – 2017)

*2016 and 2017 Dividend Yield annualized based on the weighted yield at the time of announcement of quarterly dividends

Outlook

Oil market uncertainty to persist in the short-term

21

Brent oil price


-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Cha

nge

to S

tock

s m

mbd

Source: EIA Short Term Energy Outlook, October 2017

Global liquid production / consumption balance

0

20

40

60

80

100

120

140

Jan-

13M

ar-1

3M

ay-1

3Ju

l-13

Sep

-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14

Sep

-14

Nov

-14

Jan-

15M

ar-1

5M

ay-1

5Ju

l-15

Sep

-15

Nov

-15

Jan-

16M

ar-1

6M

ay-1

6Ju

l-16

Sep

-16

Nov

-16

Jan-

17M

ar-1

7M

ay-1

7Ju

l-17

Sep

-17

Source: EIA, October 2017

Early indications of modest E&P spending growth in 2018


Annual % change in upstream E&P spending

• Most market analysts expect E&P spending growth of 0 to 10% in 2018• Flattish development in offshore spending expected – but substantial variation (i.e. uncertainty) in estimates

714

36

1116 16

-33

-9

-20-24

8 73

106

0

20 19

7

1623

3

-25

8

16

6

2127

2326

1922

-8

1519

1411

2

-27

-36

5 7

-40

-30

-20

-10

0

10

20

30

40

% A

nnua

l Cha

nge

Source: SEB Equity Research, Annual E&P spending survey, 2017

Current exploration activity not sustainable

23

Average reserve life large integrated oil companies*


Organic replacement ratio

Source: SEB Equity Research

* Exxon, Shell, BP, Chevron, Total, ENI, ConocoPhillips, Repsol, Statoil

Source: Carnegie

8

9

10

11

12

13

14

Year

s

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

Upstream cost is coming down

24

Oil companies’ cash flow break-even price versus Brent


Deepwater F&D cost back to 2008 level

Source: Goldman Sachs

0

2

4

6

8

10

12

14

16

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

F&D

Cos

t (in

cl. i

nfra

stru

ctur

e)

USD

/bbl

0

20

40

60

80

100

120

2014 2017

USD

per

bbl

Average break-even price (1) Average Brent (2)

Source: WoodMac

1. Base-case estimate of Brent price required to remain cash flow neutral (accumulate no additional debt) between 2017 and 2019 for more than 50 of the world’s leading oil companies, as estimated by Wood Mackenzie. Includes upstream costs and pro-rated shareholder distributions. Excludes downstream cash flow

2. Year-to-date for 2017

25

Backlog down following busy quarter

281

213 224

293

193242

145 125 10351

121 127178

260

182

71 630

50

100

150

200

250

300

350

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Historical Backlog (MUSD) 2013 - 2017


2017 Projects Schedule*Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Dong Fang Kan Tan 1

Atlantic Explorer

Atlantic Guardian CSEM

Fugro Multibeam x2

TDI Brooks Coring

NWAAM JV

U.S. GOM (Otos)

2D &

Oth

erEUR AMEAP

U.S. GOM (Otos)

Barents Sea JV

WesternGeco Coil Crew

Polarcus Asima

Polarcus Alima

Polar Duchess

Polar Empress

Polar Marquis

Ramform Tethys

Ramform Titan

Ramform Sterling

East Canada JV

Permian Crew

Permian Crew II

SCOOP / STACK Crew

West Kermit

U.S. GOM (Revolution) JV

3DLa

ndNSA

*Acquisition schedule excludes Fusion M-WAZ Reprocessing, other processing projects and GPS investments

Norwegian Sea (Atlantic Margin)




Atlantic Margin Barents Sea (Carlsen)

Atlantic Margin Ireland (Crean)

East Canada JV

East Canada JV

East Canada JV

West Lindsey

26

Geary

License Round Activity and TGS Positioning


Europe / Russia• Norway APA – early 2018 (awards due)• Norway 24th Round – Nov 2017 (bids due)• UK 30th Round – Nov 2017 (bids due)• Greenland – Dec 2017 & 2018 (bids due)

Africa, Middle East, Asia Pacific• Ongoing uncertainty on timing of African licensing rounds• Australia – Feb & Mar 2018 (bids due)• New Zealand – May 2018 (nominations due)• Indonesia – Nov 2017 (bids due)

North & South America • Central & Western GOM – Mar & Aug (2017-22 Plan)• Newfoundland Labrador – 2017 round delayed; call for 2018 nominations open• Nova Scotia – Dec 2017 (3-Year Rolling Plan)• Canada Onshore – at least monthly• Brazil Pre-salt rounds - Oct 2017; 15th Round - H1 2018• Mexico Round 2.4 (deep water)- Jan 2018; Round 3.1 (shallow) – Mar 2018

Summary

• Q3 net revenues of 142 MUSD • Q3 EBIT of 26 MUSD• Cash balance of 205 MUSD in addition to undrawn 75 MUSD Revolving Credit Facility• Quarterly dividend maintained at USD 0.15 per share

• Oil market uncertainty to persist in short-term• 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

• 2017 guidance (as updated 23 May 2017):• New multi-client investments of approximately USD 260 million

• Additional multi-client investments expected from sales of existing surveys with risk sharing arrangements

• Pre-funding of new multi-client investments expected to be approximately 40%-45%


Thank you

www.TGS.com

Date post:	31-May-2020
Category:	Documents
Upload:	others
View:	7 times
Download:	0 times

Q3 2017 Earnings Release Reports/Quarterly Earnings/2017 Q3 Earnings...Q3 2017 Highlights • Q3 net...

Documents