Second Quarter 2019 Earnings Presentation
July 18, 2019
- This presentation contains forward looking information
- Forward looking information is based on management assumptions and analysis
- Actual experience may differ, and those differences may be material
- Forward looking information is subject to significant uncertainties and risks as they relate to events and/or circumstances in the future
- This presentation must be read in conjunction with the press release for the second quarter 2019 results and the disclosures therein
Q2 2019 Highlights: Solid Order Intake – Continued Market Improvement
- Contract revenues of USD 94.4 million
- Price increase of more than 35% vs. average 2018 pricing
- Solid vessel production
- Order book increase of 26%
- Good client interest for ongoing MultiClient surveys
- Muted late sales
- Refinancing postponed to 2H 2019
Financial Summary
Segment EBIT** Cash Flow from Operations -84 -9 -30 -25 -23 -3 -29 -90 -70 -50 -30 -10 USD million
*EBITDA, when used by the Company, means EBIT excluding Other charges, impairment and loss/gain on sale of long-term assets and depreciation and amortization as defined in Note 14 of the Q2 2019 earnings release. **Excluding impairments and Other charges.
Order Book
**As of July 15, 2019. -5- * The order book as of June 30, 2019, includes \$27 million related to a service and support agreement in Japan up to the next annual renewal.
Financials
Unaudited Second Quarter 2019 Results
Consolidated Key Financial Figures
|
Q2 |
Q2 |
H1 |
H
1 |
Full year |
| USD million (except per share data) |
2019 |
2018 |
2019 |
2018 |
2018 |
| Profit and loss numbers Segment Reporting |
|
|
|
|
|
| Segment revenues |
215.6 |
199.4 |
357.5 |
397.2 |
834.5 |
| Segment EBITDA |
135.2 |
136.0 |
201.8 |
228.4 |
515.9 |
| Segment EBIT ex. Impairment and other charges, net |
17.7 |
13.6 |
(11.7) |
(9.1) |
36.3 |
| Profit and loss numbers As Reported |
|
5 |
|
|
|
| Revenues |
192.4 |
239.7 |
321.7 |
441.0 |
874.3 |
| EBIT |
(7.3) |
30.5 |
(49.9) |
23.2 |
39.4 |
| Net financial items |
(31.8) |
(15.7) |
(53.8) |
(38.0) |
(87.3) |
| Income (loss) before income tax expense |
(39.1) |
14.8 |
(103.7) |
(14.7) |
(47.9) |
| Income tax expense |
(9.8) |
(4.4) |
(10.4) |
(14.5) |
(40.0) |
| Net income (loss) to equity holders |
(48.9) |
10.4 |
(114.1) |
(29.1) |
(87.9) |
| Basic earnings per share (\$ per share) |
(\$0.14) |
\$0.03 |
(\$0.34) |
(\$0.09) |
(\$0.26) |
| Other key numbers |
|
|
|
|
|
| Net cash provided by operating activities |
108.1 |
121.7 |
227.6 |
195.1 |
445.9 |
| Cash Investment in MultiClient library |
65.7 |
81.3 |
127.8 |
135.0 |
277.1 |
| Capital expenditures (whether paid or not) |
19.2 |
8.3 |
30.7 |
12.3 |
42.5 |
| Total assets |
2,371.7 |
2,386.7 |
2,371.7 |
2,386.3 |
2,384.8 |
| Cash and cash equivalents |
33.2 |
24.4 |
33.2 |
24.4 |
74.5 |
| Net interest bearing debt |
1,035.7 |
1,145.3 |
1,035.7 |
1,145.3 |
1,109.6 |
| Net interest bearing debt, including lease liabilities following IFRS 16* |
1,256.2 |
|
1,256.2 |
|
|
*Following implementation of IFRS 16, prior periods are not comparable to June 2019.
The accompanying unaudited financial information has been prepared under IFRS. This information should be read in conjunction with the unaudited second quarter 2019 results, released on July 18, 2019.
Q2 2019 Operational Highlights
- Total Segment MultiClient revenues of USD 112.4 million
- Pre-funding level of 102% on USD 65.7 million of MultiClient cash investment
- Late sales of USD 45.6 million
- Contract revenues of USD 94.4 million
- Strong sequential increase driven by significantly better pricing and good vessel productivity
Pre-funding and Late Sales Revenues Combined: Segment MultiClient Revenues per Region
Europe Africa Middle East N. America S. America Asia Pacific
Seismic Streamer 3D Fleet Activity in Streamer Months: Vessel Utilization*
- 88% active vessel time in Q2 2019 – No stacked/standby time
- High vessel utilization expected in Q3
- Will operate 7 or 8 vessels in Q4 2019 dependent upon demand
Group Cost* Focus Delivers Results
- Graph shows gross cash costs excluding the effect of steaming deferral
- Q2 2019 gross cash costs impacted by
- More capacity in operation
- Higher project specific cost for some surveys
- Some Ramform Vanguard reactivation costs charged to expense
Full year 2019 gross cash costs of ~USD 550 million
*Gross cash costs are defined as the sum of reported net operating expenses (excluding depreciation, amortization, impairments, deferred steaming and Other charges) and the cash operating costs capitalized as investments in the MultiClient library as well as capitalized development costs. Following the reorganization of PGS, effective January 1, 2018, more office facility and sales costs are classified as "Selling, general and administrative costs." -11-
Consolidated Statements of Cash Flows Summary
|
Q2 |
Q2 |
1H |
1H |
Full year |
| USD million |
2019 |
2018 |
2019 |
2018 |
2018 |
| Cash provided by operating activities |
108.1 |
121.7 |
227.6 |
195.1 |
445.9 |
| Investment in MultiClient library |
(65.7) |
(81.3) |
(127.8) |
(135.0) |
(277.1) |
| Capital expenditures |
(18.5) |
(6.9) |
(28.2) |
(21.0) |
(48.0) |
| Other investing activities |
23.0 |
(7.4) |
61.8 |
(14.5) |
(25.0) |
| Net cash flow before financing activities |
46.9 |
26.1 |
133.4 |
24.6 |
95.8 |
| Interest paid on interest bearing debt |
(16.5) |
(22.5) |
(28.9) |
(31.9) |
(63.4) |
| Repayment of interest bearing debt |
(12.7) |
(12.7) |
(25.6) |
(25.8) |
(80.2) |
| Payment of lease liabilities |
(14.9) |
|
(30.2) |
|
|
| Net change drawing on RCF |
(60.0) |
(5.0) |
(90.0) |
10.0 |
75.0 |
| Net increase (decr.) in cash and cash equiv. |
(57.2) |
(14.0) |
(41.3) |
(22.8) |
27.2 |
| Cash and cash equiv. at beginning of period |
90.4 |
38.4 |
74.5 |
47.3 |
47.3 |
| Cash and cash equiv. at end of period |
33.2 |
24.4 |
33.2 |
24.4 |
74.5 |
- Received second installment from sale of Ramform Sterling in April (26% of sales price)
- Positive Q2 cash flow impact of USD 24.5 million (USD 69.1 million YTD)
- USD 8.4 million of CAPEX for reactivating Ramform Vanguard in Q2
- Total capex for reactivation ended at USD 15.5 million
- Completed at lower expenditure than plan and equipment repair cost charged to expense
- USD 90 million reduction of RCF drawing YTD
Balance Sheet Key Numbers
|
June 30 |
June 30 |
December 31 |
| USD million |
2019 |
2018 |
2018 |
| Total assets |
2,371.7 |
2,386.3 |
2,384.8 |
| MultiClient Library |
676.4 |
661.0 |
654.6 |
| Shareholders' equity |
596.8 |
785.7 |
721.8 |
| Cash and cash equivalents (unrestricted) |
33.2 |
24.4 |
74.5 |
| Restricted cash |
42.8 |
44.1 |
43.2 |
| Liquidity reserve |
208.2 |
224.4 |
159.5 |
| Gross interest bearing debt* |
1,111.7 |
1,213.9 |
1,227.3 |
| Gross interest bearing debt, including lease liabilities following IFRS 16* |
1,332.2 |
|
|
| Net interest bearing debt* |
1,035.7 |
1,145.3 |
1,109.6 |
| Net interest bearing debt, including lease liabilities following IFRS 16* |
1,256.2 |
|
|
- Gross interest bearing debt (ex. lease liabilities) of USD 1,111.7 million
- Down USD 115.6 million YTD
- Net interest bearing debt (ex. lease liabilities) of USD 1,035.7 million
- Down USD 73.9 million YTD
- Liquidity reserve of USD 208.2 million
- Up USD 48.7 million YTD
- Total Leverage Ratio (as defined in credit agreement) of 2.85:1
LTM Free Cash Flow Generation
Free cash flow will improve further in a recovering seismic market
Summary of Debt and Drawing Facilities
Debt and facilities as of June 30, 2019: Long-term Credit Lines and Interest Bearing Debt Nominal Amount Total Credit Line Financial Covenants USD 400.0m TLB, due March 2021 Libor (minimum 0.75%) + 250 bps USD 379.0m None, but incurrence test: total leverage ratio ≤ 3.00x* Revolving credit facility ("RCF"), due September 2020 Libor + margin of 325-625 bps (linked to TLR) + utilization fee USD 175.0m USD 350.0m Maintenance covenant: total leverage ratio 3.00x Q2-19, reduced to 2.75x by Q3-19 Japanese ECF, 12 year with semiannual instalments. 50% fixed/ 50% floating interest rate USD 345.7m None, but incurrence test for loan 3&4: Total leverage ratio ≤ 3.00x* and Interest coverage ratio ≥ 2.0x* December 2020 Senior Notes, coupon of 7.375% USD 212.0m None, but incurrence test: Interest coverage ratio ≥ 2.0x*
Debt maturity profile:
Expect to refinance in 2H 2019
- Positioned to execute on short notice
- Timing and structure dependent on market conditions
Operational Update and Market Comments
Unaudited Second Quarter 2019 Results
Streamer Operations July 2019
Seismic Contract Market Outlook
- More than 35% higher prices on 2019 contract work booked to date vs. average 2018 rate
- PGS booking of Q4/Q1 work significantly ahead of last year
- High bidding activity with leads and bids for new work on a positive trend
- Expect higher contract activity level and fleet utilization this winter season compared to last
MultiClient in Fundamental Growth
PGS square kilometers of MultiClient data acquired 0 20,000 40,000 60,000 80,000 2016 2017 2018 Sq.km MC acquired
- Substantial MultiClient investment during downturn
- PGS late sales revenues
- Strong quarterly fluctuations
- Last Twelve Months ("LTM") June 30, 2019 up more than 20% vs. LTM June 30, 2018
- LTM June 30, 2018 up slightly less than 20% vs. LTM June 2017
- Large opportunity basket for 2H19
- PGS prefunding revenues
- Stronger internal competition for capacity in a recovering contract market
- Targeting a prefunding level of 80-120%, expect to be in upper half for full year 2019
Significant Supply Reduction
• Group gross cash cost of ~USD 550* million, excluding deferred steaming
- MultiClient cash investments ~USD 225* million
- Approximately 50% of 2019 active 3D vessel time allocated to MultiClient
• Capital expenditures of ~USD 70 million
Summary
- Contract revenues benefitted from strong price increase and good vessel productivity
- Contract work generates significant cash flow
- Strong order book increase
- Driven by higher contract volume
- Visibility into 1H 2020
- Solid prefunding for ongoing MultiClient surveys
- Seismic market continues to improve
Taking leadership position through fully integrated offering
Thank You – Questions?
Appendix Main Yard Stays* Next Six Months
| Vessel |
When |
Expected
Duration |
Type of Yard Stay |
| Apollo |
Q3 2019 |
22 days |
Main class |
| Ramform Hyperion |
Q4 2019 |
14 days |
Scrubber installation |
*Yard stays are subject to changes.
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