Q2 2017 Earnings Release Releases/2017/2017 Q2 Earnings R… · These factors include TGS’ reliance on a cyclical industry and principal customers, TGS’ ability to continue to

Kristian Johansen Sven Børre LarsenCEO CFO3 August 2017

Q2 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

Q2 2017 Highlights

• Q2 net revenues of 108 MUSD, slightly below Q2 2016 but up 25% from Q1 2017• Net late sales of 79 MUSD, compared to 84 MUSD in Q2 2016

• Net pre-funding revenues of 27 MUSD were up 3% from Q2 2016, funding 46% of TGS’ operational multi-client investments for the quarter

• Operational multi-client investments of 59 MUSD in addition to 2 MUSD from risk sharing arrangements

• Operating profit for the quarter was 18 MUSD compared to 22 MUSD in Q2 2016

• Strong cash flow from operations of 53 MUSD compared to 9 MUSD in Q2 2016• Cash balance of 239 MUSD in addition to undrawn 75 MUSD Revolving Credit Facility

• Quarterly dividend maintained at USD 0.15 per share

• Improved visibility for Q3• Backlog increase to 127 MUSD, up 24% from Q2 2016

• Record-high survey acquisition activity in Q3

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

Operational Highlights

Q2 2017 Operations

5

Fugro Multibeam I

Dong Fang Kan Tan 1 2D JVWesternGeco Coil Crew


Fugro Multibeam II

Atlantic Explorer JV

TDI Brooks Coring

Polarcus Alima

Polar Duchess

Polarcus Asima

Polar Empress

Polar Marquis

Ramform Tethys JV

Permian Crew

Q2 Activity – U.S. Gulf of Mexico

Revolution XII/XIII• ~7,150 km2 (306 OCS blocks) multi-client full-azimuth survey in

collaboration with Schlumberger in Green Canyon, Atwater Valley and Ewing Bank areas

• Dual Coil Shooting Acquisition completed in early Q2

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

Mississippi Canyon, Atwater Valley and Ewing bank areas• Expanded to ~27,000 km2 (1,166 OCS blocks ) with industry funding• Reimaging is 50% 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 underway

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


Q2 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

Long Range 3D

• ~9,100 km2 multi-client survey over open acreage within 2018 Sector of the Scheduled Land Tenure

Well positioned for future licensing rounds

• 2D campaign and Long Range 3D to continue in Q3 along with East Flemish Pass 3D, Harbour Deep 3D and Cape Broyle 3D to bring total 3D acquisition volume to 19,550 km2 in 2017

• Following the most active year ever in this region, the TGS/PGS JV library will exceed 175,000 km of 2D data and 30,800 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


Q2 Activity – NorwayAM17 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 to complete in Q3 2017


Q2 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

• TGS’ first seismic survey in the prolific Permian

• Data acquisition expected to complete in early Q4 2017

• Second Permian seismic survey, 520 km2 West Lindsey 3D, expected to commence in Q3 2017

Permian Well Database

• Comprehensive Permian well database announced to clients in Q1 2017

• Expanded to over 458,000 wells in Q2 2017 (including validated well headers and digital LAS) supported by multiple interpretive products

• TGS data will allow operators to better assess the positions available in the basin, prepare for A&D activity, and ensure the safe, reliable, and optimal production of their acreage positions


Q2 Activity – Africa Middle East

NWAAM 2017

• Extended to over 22,500 km of multi-client 2D seismic in partnership with PGS and GeoPartners; acquisition completed in Q2 2017

• 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 over 50,000 km of 2D data and 8,000 km2 of 3D data


Financials

5 53 3

7

3 2 20

2

4

6

8

10

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

Proprietary revenues

90 90

38

8467

145

69 79

020406080

100120140160

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

Late sales revenues

-7% Y/Y74

3723 26

39

17 15 27

0

20

40

60

80

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

Prefunding revenues

169132

64114 113

165

86 108

0

50

100

150

200

250

300

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

Total revenues

12

Net Revenues

3% Y/Y

-48% Y/Y

-6% Y/Y


NSA52%

Europe27%

AMEAP9%

Other12%

Q2 2016

NSA37%

Europe47%

AMEAP3%

Other13%

Q2 2017

2D11%

3D77%

GPS12%

Q2 2017

13

Net Revenue Breakdown

2D48%

3D42%

GPS10%

Q2 2016


99

230

62 69 74 92 62 69

0

50

100

150

200

250

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

Amortization and impairment

49

-20

63

-35

29 33

74

12

-50

0

50

100

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

Free cash flow *

14

Operating Expenses, EBIT, Free Cash Flow

65% - rate

4631

-19

2411

45

217

-40%

-20%

0%

20%

40%

-30-20-10

01020304050

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


2228

18 17 2024

19 19

0

5

10

15

20

25

30

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

Operating expenses *

11% Y/Y

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

976839 830 823 816 812 820 812

0

200

400

600

800

1,000

1,200

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

Multi-client library - NBV

135

8851 59 64

46 58 59

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

0

50

100

150

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

10%

0%

16%

6%

11%

19%

38%

0%4%

10%14%

16%19%

37%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Fullyamortized

2013 2014 2015 2016 2017 WIP

Net revenues Net book value

Net revenues vs net book value – year of completion

381

609

427

252184

401

0

100

200

300

400

500

600

700

2013 2014 2015 2016 2017 WIP

Original investments Net Book Value

20 %

47%

75%

23%

7%12%

66%

Investments – year of completion


*Operational investments excluding risk-sharing arrangements

16

Q2 2017 Income StatementUSD million, except EPS Q2 2017 Q2 2016 Change in %

Net revenues 108 114 -6%

Cost of goods sold – proprietary and other 0.3 0.8 -67%

Amortization of multi-client library 65% 69 69 0%

Gross margin 38 44 -13%

Personnel costs 12 11 9%

Other operating expenses 6 9 -30%

Cost of stock options 0.1 0.3 -71%

Depreciation 2 3 -20%

Operating profit 17% 18 22 -16%

Net financial items -1 -0.3 -318%

Profit before taxes 16% 17 21 -21%

Taxes 7 5 62%

Net Income 9% 10 17 -43%

EPS, Undiluted 0.09 0.17 -43%

EPS, Fully Diluted 0.09 0.17 -43%


17

Q2 2017 Cash Flow Statement

USD million Q2 2017 Q2 2016 Change in %

Received payments from customers 74 28 159%

Payments for operational expenses (18) (19) 3%

Paid taxes (2) - N/A

Operational cash flow 53 9 460%

Investments in tangible and intangible assets (3) (1) -156%

Investments in multi-client library (41) (44) 6%

Investments through mergers and acquisitions (5) - N/A

Interest received 0.2 0.3 -17%

Interest paid (0.1) (0.3) 71%

Dividend payments (15) (14) -13%

Proceeds from share issuances 2 2 49%

Change in cash balance -8 -48 82%


18

Balance Sheet


USD million Q2 2017 Q1 2017 Change in % Q4 2016AssetsCash and cash equivalents 239 248 -4% 191Other current assets 268 219 22% 353Total current assets 508 467 9% 544Intangible assets and deferred tax asset 84 85 -1% 86Other non-current assets 2 10 -83% 11Multi-client library 812 820 -1% 812Fixed assets 21 22 -5% 23Total Assets 1,426 1,405 2% 1,477LiabilitiesCurrent liabilities 227 192 18% 262Non-current liabilities 5 8 -35% 6Deferred tax liability 33 42 -21% 39Total Liabilities 265 242 10% 307Equity 1,161 1,162 0% 1,169Total Liabilities and Equity 1,426 1,405 2% 1,477

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

• Q3 2017: USD 0.15 per share to be paid on 24 August 2017 • Shares will trade ex-dividend on 10 August 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

USD 0.15per Quarter

Outlook

Oil price uncertainty persists – but lower cost stimulating exploration activity

21

Oil companies’ cash flow break-even price versus Brent

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


-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, July 2017

Global liquid production / consumption balance

0

20

40

60

80

100

120

2014 2017

USD

per

bbl

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

Source: Wood Mackenzie, EIA

22

Backlog increase of 24% relative to Q2 2016

185 178

281

213260

293

193 182145 125

71 51

121

224 242

103 127

0

50

100

150

200

250

300

350

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Historical Backlog (MUSD) 2013 - 2017


Record High Activity in Q3 2017New Activity Announced Today:

U.S GOM Project Expansions:• Fusion re-imaging expanded to 27,000 km2 (1,166 blocks)• Otos seafloor sampling expanded from 250 to 350 seafloor cores

Eastern Canada Project Expansion:• Harbour Deep 3D expanded to ~5,000 km2

Onshore New Project Announced:• ~200 km2 Geary 3D in SCOOP and Stack plays to commence in Q3


Busy Acquisition Season at Record Low Unit Cost

Data acquisition volumes (1)

24

• 3D data acquisition volumes close to all-time high in 2017

• Vessel related MC investments ~50% below 2012, which was the last time similar 3D volumes were acquired

Vessel months consumed by TGS

• TGS has committed more than 40 3D vessel months for 2017

• During the summer eight 3D vessels will be working on TGS projects – almost 30% of the active global fleet

0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (3)

Inde

x

3D 2D Other data types MC investments (2)

0

10

20

30

40

50

60

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (3)

Tota

l ves

sel m

onth

s

3D 2D

1. Index 2015=100. Based on normalization between different data types. Excludes onshore and non-seismic data types.2. Excluding processing3. Estimated based on current commitments for 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

25

Geary

License Round Activity and TGS Positioning


Europe / Russia• Norway APA – Sep 2017 (bids 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• Rep. of Guinea – Oct 2017 (Round launch)• Ongoing uncertainty on timing of other African licensing rounds• Australia –Oct 2017, Feb & Mar 2018 (bids due)• New Zealand – Sep 2017 (bids due)• Indonesia – Sep 2017 (bids due)

North & South America • Central & Western GOM – Mar & Aug (2017-22 Plan)• Newfoundland Labrador – Q4 2017 but may be delayed• Nova Scotia – Dec 2017 (3-Year Rolling Plan)• Canada Onshore – at least monthly• Brazil 14th round - Sep 2017; Pre-salt rounds - Oct 2017• Mexico Deepwater Round 2.4 - Jan 2018 (bids due)

Summary

• Q2 net revenues of 108 MUSD • Q2 EBIT of 18 MUSD• Significant improvement in cash flow, 53 MUSD versus 9 MUSD in Q2 2016• Cash balance of 239 MUSD in addition to undrawn 75 MUSD Revolving Credit Facility• Quarterly dividend maintained at USD 0.15 per share

• Improved visibility for Q3 as a result of increased backlog and record-high survey acquisition activity• 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

Documents

Q2 2017 Earnings Release Releases/2017/2017 Q2 Earnings R… · These factors include TGS’ reliance on a cyclical industry and principal customers, TGS’ ability to continue to