Kristian Johansen Sven Børre LarsenCEO CFO2 February 2017
Q4 2016 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
Q4 2016 Highlights• Q4 net revenues of 165 MUSD compared to 132 MUSD in Q4 2015
• Net late sales of 145 MUSD, up 60% from 90 MUSD in Q4 2015
• Net pre-funding revenues of 17 MUSD were down 53% from Q4 2015, funding 19% (37% excl. risk-sharing investments) of TGS’ operational multi-client investments for the quarter (88 MUSD including 42 MUSD from risk sharing arrangements)
• Operating profit for the quarter was 42 MUSD compared to -140 MUSD in Q4 2015
• Cash flow from operations was 79 MUSD compared to 99 MUSD in Q4 2015• Cash balance of 191 MUSD at 31 December 2016 in addition to undrawn 75 MUSD
Revolving Credit Facility
• Quarterly dividend maintained at USD 0.15 per share
• Full Year 2016 net revenues of 456 MUSD compared to 612 MUSD in 2015
• Full Year 2016 operational investments of 271 MUSD including 51 MUSD from risk sharing arrangements (39% pre-funded, 48% excl. risk-sharing investments)
• Full Year 2016 operating profit of 53 MUSD compared to -21 MUSD in 2015
3©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
Operational Highlights
Q4 2016 Operations
5
Sanco Spirit 2D JV
Fugro Multibeam
Northern Explorer 2D
TDI Brooks Coring x2
Atlantic Explorer 2D JV
Dong Fang Kan Tan 1 2D JVWesternGeco Coil Crew
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
Q4 Activity – Gulf of Mexico
Revolution XII and XIII• ~7,150 km2 (306 blocks) multi-client full-azimuth survey in
collaboration with WesternGeco
• Survey utilizes WesternGeco’s proprietary Q-Marine* point-receiver marine seismic system combined with the proprietary multi-vessel, Dual Coil Shooting acquisition technique
• Located in Green Canyon, Atwater Valley and Ewing Bank protraction areas of the Central Gulf of Mexico - This part of the Gulf of Mexico continues to see the highest activity level and benefits from significant near-term lease turnover
Gigante 2D Seismic and Multibeam, Coring, and Geochemical Surveys • ~186,000 km multi-client 2D regional survey completed
during Q4 2016 with fast track data made available for December 2016 licensing round
• Data processing will continue throughout 2017
• ~600,000 km2 multibeam survey completed in Q4 2016 with geochemical analysis of the acquired cores continuing in 2017
• Interpretation of the data will integrate with the 2D seismic survey and enhance the value proposition to clients
6
*Mark of Schlumberger
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
Q4 Activity – East Canada & NW AfricaNewfoundland Labrador 2016 Season• 41,800 km multi-client 2D survey in partnership with
PGS – sixth consecutive season of data acquisition completed in Q4 2016 with 2,300 km2 of 3D data added earlier in the year
• TGS-PGS JV library in this region now exceeds 153,000 km of modern 2D data and 11,200 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
• Successful licensing rounds in 2015 and 2016 and new Call for Bids issued over approximately 2.3 million hectares in Labrador South region (bids due 8 November 2017)
North West African Atlantic Margin NWAAM 2017• Over 11,500 km of multi-client 2D seismic in
partnership with PGS completed in Q4 2016
• Designed to infill, extend and complement the TGS NWAAM 2012 2D survey which helped with recent commercial discoveries in the MSGBC basin
• Confirms TGS commitment to the leading frontier basin in Africa, where TGS now has approximately 40,000 km of 2D data and 8,000 km2 of 3D data
7©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
Financials
6 5 5 53 3
7
3
0
2
4
6
8
10
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Proprietary revenues
72 82 90 90
38
84 67
145
020406080
100120140160
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Late sales revenues
60% Y/Y
94
5374
3723 26
3917
0
20
40
60
80
100
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Prefunding revenues
172 140 169 13264
114 113165
0
50
100
150
200
250
300
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Total revenues
9
Net Revenues
-53% Y/Y
-37% Y/Y
25% Y/Y
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
NSA60%Europe
22%
AMEAP4%
Other14%
Q4 2015
NSA66%
Europe21%
AMEAP5%
Other9%
Q4 2016
2D25%
3D68%
GPS7%
Q4 2016
10
Net Revenue Breakdown
2D45%
3D43%
GPS12%
Q4 2015
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
25 24 2228
18 17 2024
0
5
10
15
20
25
30
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Operating expenses *
-12% Y/Y
* Include personnel costs and other operating expenses. Adjusted for restructuring costs and larger impairments of operating items
10574 99
230
62 69 7492
0
50
100
150
200
250
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Amortization and impairment *
110
-76
49-20
63
-3529 33
-100
-50
0
50
100
150
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Free cash flow *
11
Operating Expenses, EBIT, Free Cash Flow
57% - rate
37 38 46 31
-19
2411
45
-40%
-20%
0%
20%
40%
-30-20-10
01020304050
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
EBIT *
EBIT EBIT Margin
* Q1-Q4 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
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
876 919 976 839 830 823 816 812
0
200
400
600
800
1,000
1,200
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Multi-client library - NBV
163116 135
8853 62 68
88
0%10%20%30%40%50%60%70%80%90%100%
0
50
100
150
200
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Pref
undi
ng ra
tio
Ope
ratio
nal i
nves
tmen
ts
Operational investments and prefunding ratio
Operational investments Prefunding ratio
12
Multi-Client Library
13%
1%
10% 10%17%
48%
0%5%
14%17% 19%
44%
0%
10%
20%
30%
40%
50%
60%
Fullyamortized
2013 2014 2015 2016 WIP
Net revenues Net book value
Net revenues vs net book value – year of completion
270
381
609
427
250
467
0
100
200
300
400
500
600
700
2012 2013 2014 2015 2016 WIP
Original investments Net Book Value
20 %
29% 54%16%
0%10%
68%
Investments – year of completion
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
*Q4 2016 prefunding rate excluding risk-sharing arrangements
13
Q4 2016 Income Statement
USD million, except EPS Q4 2016 Q4 2015 Change in %Net revenues 165 132 25%Cost of goods sold – proprietary and other 0.1 0.4 -77%
Amortization of multi-client library 57% 92 230 -60%
Gross margin 72 -99 173%Personnel costs 16 15 5%
Other operating expenses 11 22 -49%
Cost of stock options 0.1 0.2 -45%
Depreciation 3 3 -8%
Operating profit 25% 42 -140 130%Net financial items -3 -2 -96%Profit before taxes 23% 39 -142 127%Taxes 15 -20 174%
Net Income 15% 24 -122 120%EPS, Undiluted 0.24 -1.20 120%
EPS, Fully Diluted 0.23 -1.19 120%
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
Sheet1
USD million, except EPSQ4 2016Q4 2015Change in %
Net revenues16513225%
Cost of goods sold – proprietary and other0.10.4-77%
Amortization of multi-client library57%92230-60%
Gross margin72-99173%
Personnel costs16155%
Other operating expenses1122-49%
Cost of stock options0.10.2-45%
Depreciation33-8%
Operating profit25%42-140130%
Net financial items-3-2-96%
Profit before taxes23%39-142127%
Taxes15-20174%
Net Income15%24-122120%
EPS, Undiluted0.24-1.20120%
EPS, Fully Diluted0.23-1.19120%
Sheet2
Sheet3
14
Q4 2016 Cash Flow Statement
USD million Q4 2016 Q4 2015 Change in %
Received payments from customers 111 140 -21%
Payments for operational expenses (27) (24) -15%
Paid taxes (5) (17) 72%
Operational cash flow 79 99 -21%
Investments in tangible and intangible assets (2) (1) -105%
Investments in multi-client library (45) (119) 62%
Investments through mergers and acquisitions - (8) 100%
Interest received 0.2 0.8 -75%
Interest paid (0.05) (0.09) 46%
Dividend payments (14) - N/A
Proceeds from share issuances - 0.8 -100%
Change in cash balance 18 -27 165%
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
Sheet1
USD millionQ4 2016Q4 2015Change in %
Received payments from customers111140-21%
Payments for operational expenses(27)(24)-15%
Paid taxes(5)(17)72%
Operational cash flow7999-21%
Investments in tangible and intangible assets(2)(1)-105%
Investments in multi-client library(45)(119)62%
Investments through mergers and acquisitions- 0(8)100%
Interest received0.20.8-75%
Interest paid(0.05)(0.09)46%
Dividend payments(14)- 0N/A
Proceeds from share issuances- 00.8-100%
Change in cash balance18-27165%
Sheet2
Sheet3
15
Balance Sheet
The Company holds no interest-bearing debt
USD million Q4 2016 Q3 2016 Change in % Q4 2015AssetsCash and cash equivalents 191 173 10% 163Other current assets 353 275 28% 308Total current assets 544 449 21% 471Intangible assets and deferred tax asset 83 88 -6% 90Other non-current assets 11 21 -49% 25Multi-client library 812 816 0% 839Fixed assets 23 23 -2% 30Total Assets 1,473 1,397 5% 1,455LiabilitiesCurrent liabilities 262 198 32% 218Non-current liabilities 6 7 -13% 6Deferred tax liability 41 37 12% 33Total Liabilities 309 242 28% 257Equity 1,164 1,155 1% 1,198Total Liabilities and Equity 1,473 1,397 5% 1,455
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Sheet1
USD millionQ4 2016Q3 2016Change in %Q4 2014Q4 2015
Assets
Cash and cash equivalents19117310%256163
Other current assets35327528%521308
Total current assets54444921%778471
Intangible assets and deferred tax asset8388-6%8590
Other non-current assets1121-49%4425
Multi-client library812816-0%818839
Fixed assets2323-2%4330
Total Assets1,4731,3975%1,7681,455
Liabilities
Current liabilities26219832%393218
Non-current liabilities67-13%76
Deferred tax liability413712%2933
Total Liabilities30924228%428257
Equity1,1641,1551%1,3391,198
Total Liabilities and Equity1,4731,3975%1,7681,455
Sheet2
Sheet3
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 paid on 25 August 2016 • Q4 2016: USD 0.15 per share dividend paid on 18 November 2016• Q1 2017: USD 0.15 per share dividend to be paid on 23 February 2017 (shares will trade ex-
dividend on 9 February 2017)
16©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
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
3.7% 3.6%4.0% 3.9%
4.9%5.2%
3.6%
2.5%
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
Different Cycles – Different Priorities
18©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
Sources: Barclays; TGS
478 568 609
932 883 915
612
456
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Recovery phase
Growth and market share Cash flow and risk mitigationCapital efficiency and
profitable growth
Strategic Priorities
Strategy Pays Off - Market Cap Peak vs. Current
19©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
TGS has once again proven its resilient business model
Source: S&P Capital IQ
2014 Current
2,3622,955
2,378
256510
360217 30 19
TGS CGG PGS SPU ION PLCS EMGS MCG SBX
2,506
238
1,198
243 7128 30 15 7
TGS CGG PGS SPU ION PLCS EMGS MCG SBX
Exploration Spending Likely to Recover Long-term
Two factors point to increased activity in the longer-term
1. Current exploration efforts are unsustainable
2. Cost levels should eventually come down to levels that justify higher spending at current oil prices
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved 20
1. Current Exploration Efforts are Unsustainable
• Substantial reduction in oil companies’ exploration spending - Seismic spending down more than 60% since peak in 2013
• This has resulted in historically low exploration success• Only 2.7bn barrels of new conventional oil supply was discovered in 2015, the lowest since 1947
(Wood Mackenzie)• Global reserve replacement ratio well below 1 in 2015-16
21
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Organic Reserve Replacement Ratio
Source: SEB Research
6
7
8
9
10
11
12
13
14
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Year
s
Integrated Oil Companies Avg. Oil Reserve Life
Source: Nordea
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
2. Costs are Coming Down
• Substantial cost reductions in E&P and service industries – break-even prices have fallen almost 50% from peak
• Historically the largest oil companies have been able to produce decent return on capital at real oil prices of around USD 50 per barrel
22
Source: Nordea, EIA, TGS
0
20
40
60
80
100
120
0%
5%
10%
15%
20%
25%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Bre
nt U
SD
/bl
RO
CE
ROCE Brent (RHS)
Avg. ROCE 1990-2015: 12%Avg. real Brent: USD 53 per bbl
0
20
40
60
80
100
120
140
160
USD/bbl
Brent oil priceBreak-even after CAPEX (USD/bbl)Break-even after CAPEX and div. (USD/bbl)
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
Integrated oil companies’ break-even oil price ROCE 10 largest integrated oil companies vs. Real Brent oil price
TGS MC Library – Managing Risk & Return
Low beta
23
Medium beta High Beta
• Lower returns but high IRR• Prefunding in excess of 70% - low or
no net investment• Project characteristics
• Awarded acreage• Onshore areas • Farm-ins / relinquishments• Low downside risk
• Return targets >2x investment• Prefunding of 30-50%• Open acreage and regular license
rounds• Established multi-client areas• Many clients
• Return targets >2.5x investment• Low or no prefunding• Risk sharing with suppliers• G&G knowledge driven projects• Higher risk and volatility
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License Round Activity and TGS Positioning
24
Europe / Russia• Norway APA – H1 2017 (Round Launch)• Norway 24th Round – H1 2017 (Round Launch)• UK Supplementary Round – 7 Mar 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 2017 (bids due)• New Zealand – 2017 (consultation underway)• Indonesia – H2 2017 (Round announcements)
North & South America • Central GOM – Mar 2017 (2012-17 Plan)• Central & Western GOM – Aug 2017 (2017-22 Plan)• Newfoundland & Labrador – Nov 2017 (Scheduled Land Tenure)• Nova Scotia – Oct 2017 (3-Year Rolling Plan)• Canada Onshore – at least monthly• Brazil – 14th Offshore and Pre-Salt Rounds in 2017• Mexico – Round 2.1 & 2.2 in H1 2017, further rounds into 2019
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
25
Backlog
146185 178
213 224260
193242
182125 103
71
281 293
145
510
50
100
150
200
250
300
350
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Historical Backlog (MUSD) 2012 - 2016
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
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
TDI Brooks Coring
NWAAM JV
U.S. GOM
2D &
Oth
er
EUR AMEAP
U.S. GOM
Barents Sea JV
WesternGeco Coil Crew
Polarcus Amani
Polarcus Asima
Polar Duchess
East Canada JV
West Kermit West Kermit
U.S. GOM JV
3DLa
nd
NSA
*Acquisition schedule excludes Fusion M-WAZ Reprocessing, other processing projects and GPS investments
Atlantic Margin
Atlantic Margin
Atlantic Margin
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved 26
Guidance
• Based on the current investment plan, TGS provides the following guidance for 2017:
• New multi-client investments* at approximately the same level as in 2016
• 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%
*New multi-client investments excluding investments related to surveys with risk sharing arrangements
©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved 27
Multi-client investments and pre-funding
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016 2017guidance
MU
SD
MC investments related to risk shareNew multi-client investments*
Summary
• Q4 net revenues of 165 MUSD • Positive cash flow further strengthens balance sheet• Cash balance of 191 MUSD in addition to undrawn 75 MUSD Revolving Credit Facility• Quarterly dividend maintained at USD 0.15 per share
• Although some improvement seen over the past year, market conditions are expected to remain challenging in 2017
• 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:• New multi-client investments at approximately the same level as in 2016
• 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%
28©2017 TGS-NOPEC Geophysical Company ASA. All rights reserved
Thank you
www.tgs.com
Q4 2016 Earnings ReleaseForward-Looking StatementsQ4 2016 HighlightsOperational HighlightsQ4 2016 OperationsQ4 Activity – Gulf of MexicoQ4 Activity – East Canada & NW AfricaFinancialsNet RevenuesNet Revenue BreakdownOperating Expenses, EBIT, Free Cash FlowMulti-Client Library Q4 2016 Income StatementQ4 2016 Cash Flow StatementBalance SheetDividend stable at USD 0.15 per shareOutlookDifferent Cycles – Different PrioritiesStrategy Pays Off - Market Cap Peak vs. CurrentExploration Spending Likely to Recover Long-term1. Current Exploration Efforts are Unsustainable2. Costs are Coming DownTGS MC Library – Managing Risk & ReturnLicense Round Activity and TGS PositioningBacklog2017 Projects Schedule*GuidanceSummarySlide Number 29