COMPANY UPDATE AND Q1 2019 RESULTS
Oslo, 9 May 2019
Bjørn Petter Lindhom, CEO Hege Veiseth, CFO
Disclaimer
This quarterly presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. Such forward-looking information and statements are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Electromagnetic Geoservices ASA (EMGS) and its subsidiaries. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the EMGS' businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time. Although Electromagnetic Geoservices ASA believes that its expectations and the information in this Report were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this Report. Electromagnetic Geoservices ASA nor any other company within the EMGS Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the Report, and neither Electromagnetic Geoservices ASA, any other company within the EMGS Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the Report. Electromagnetic Geoservices ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the Report.
Operations, Market and Outlook
Strong start for 2019
- Strong 2019 sales with substantial contracts and traction in all major regions:
- USD 2 million APA (Norway) uplifts
- USD 8 million multi-client agreement with Equinor (Norway)
- USD 3.4 million fully pre-funded multi-client survey in the Barents Sea (Norway)
- USD 24 million proprietary acquisition in South-East Asia
- USD 1 million well calibration study with Equinor (global)
- USD 73.3 million proprietary acquisition LOA for PEMEX (Mexico) with a minimum value of USD 29.3 million
- Total backlog to date of approx. USD 100 million
- Stronger financial position
- Positive cash flow
- Improved balance sheet
- No bond debt maturities before 2023
Well positioned to capitalise on market recovery
- Significantly reduced fixed cost base
- Through the downturn EMGS has:
- Retained key technical competences: Motivated, dynamic and innovative work force
- Kept the global presence intact
- Invested significantly in the JIP project to develop the Deep Blue source with Equinor and Shell
- Developed an improved 3D EM inversion algorithm (Gauss-Newton)
- Sought to deepen and broaden client relationships in anticipation of eventual market recovery
- Employment of flexible and low fixed-cost solutions for increased capacity, including development of a mobile acquisition system
- Well positioned for strategic cooperation(s)
Key developments and EM market trends
- Large proprietary contracts: EMGS awarded 4th and 8th largest EM contracts ever; USD 73 million (LOA) and USD 24 million, respectively
- Clients investing in EM knowledge: Two well calibration studies on-going, third well calibration study being discussed with a supermajor
- Regulator support increasing: EM investments count as work units / can be included in workprogram in an increasing number of countries
Largest EM Contracts
250
Significant increase in order backlog
Comments Order backlog
- Order backlog at USD 26 million at end of Q1 2019
- Subsequently further increased to approx. USD 100 million
- 2019 has been characterised by increased tender and direct negotiation activity
EMGS returning to Mexico to work for Pemex
- Contract value under LOA of USD 73.3 million over a two year-period, with a minimum value of USD 29.3 million
- EMGS has worked for PEMEX on 3 major contracts since 2008
- Work program includes acquisition, processing and inversion services
- Well positioned to secure additional work in GoM
AAPG/SEG International Conference & Exhibition September 2016 – Cancun, Mexico
Vessel update
- EMGS exercised the first of three six-months option periods for the BOA Thalassa.
- BOA Thalassa on firm charter until end Q1 2020
- The Company expects to operate two vessels in 2019
- Atlantic Guardian in Gulf of Mexico
- BOA Thalassa in Southeast Asia
- The Company is developing a mobile acquisition solution, which will allow for a more flexible approach to increased demand and lower fixed costs for the Company
Q1 2019 Highlights
Operational highlights
- Proprietary contract in South America completed
- Commencement of a proprietary survey in South-East Asia
- USD 8.0 million multi-client agreement signed with Equinor
Financial highlights
- Revenues of USD 10.8 million
- EBITDA of USD 2.6 million
- Adjusted EBITDA negative USD 1.2 million
Subsequent events
- LOA for a USD 73.3 million multi-year acquisition contract with a minimum value of USD 29.3 million
- New guarantee facility of USD 7.5 million
- Multi-client pre-funding revenues of USD 3.4 million in Norway
- EMGS exercised the first of three six-months option periods for the BOA Thalassa
First quarter 2019 performance
- Revenues
- USD 10.8 million
- Mainly proprietary work in South America and multiclient revenues in Norway
- Vessel utilisation of 11%
- Two vessels on charter
- EBITDA
- USD 2.6 million
- Negative adjusted EBITDA* of USD 1.2 million
*Adjusted EBITDA includes capitalised multi-client expenses and vessel and office lease expenses
Key financial metrics Quarterly development (USD million)
Operational costs
Quarterly operational cost base* development (USD million)
Comments
- Operational costs base in Q1 19 of USD 12.0 million
- Comparable to Q1 last year
- Cost control
- Strong focus on cost optimisation
Capitalised multi-client expenses
- Charter hire, fuel and crew expenses
- Vessel and office lease expenses
- Other operational expenses
- Employee expenses
*Cost base is defined as operational costs (charter hire etc, employee expenses, other operating expenses) plus MC investments and vessel and office lease payments presented as financial leases from 1 January 2019, restructuring charges and other extraordinary items
Increase in free cash in Q1 2019
- Net increase in free cash of USD 3.1 million to USD 9.6 million
- Negative adjusted EBITDA of USD 1.2 million
- Trade receivables decreased by USD 2.5 million to USD 2.2 million
- USD 0.7 million in interest-payments on convertible bond
- Total investments of USD 0.3 million
Summary
- Strong 2019 sales with substantial contracts and traction in all major regions
- Total backlog to date of approx. USD 100 million
- Well positioned to capitalise on market recovery