First Quarter 2018 Results
Earnings Presentation
Cautionary Statement
- 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 first quarter and preliminary full year 2018 results and the disclosures therein
- Petroleum Geo-Services ASA and its subsidiaries ("PGS" or "the Company") has implemented the new revenue recognition standard, IFRS 15, as the Company's external financial reporting method. This change impacts the timing of revenue recognition for MultiClient pre-funding revenues and related amortization. PGS will for internal management purposes continue to use the revenue recognition principles applied in previous periods, which are based on percentage of completion, and use this for numbers disclosed as Segment Reporting. See Note 15 of the Q1 2018 earnings release for definitions of terms. See Note 16 of the Q1 2018 earnings release for a description of the change in revenue recognition resulting from the implementation of IFRS 15. PGS will not restate prior periods
A Good Start for Achieving Positive 2018 Cash Flow
- Segment Revenues of USD 197.8 million, ahead of plan
- EBITDA USD 92.3 million
- Strong Segment MultiClient performance:
- Total MultiClient revenues of USD 142.0 million
- Strong late sales of USD 83.5 million
- Sales-to-investment of 2.6 times
- Pre-funding level of 109%
- Marine contract market still challenging with a weak winter season
- Total Leverage Ratio below 3.0:1
- First quarter operating under the new organizational structure
- 2018 gross cash cost estimate adjusted upwards to reflect higher activity, FX changes and higher fuel prices -3-
Financial Summary
*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 15 of the Q1 2018 earnings release . **Excluding impairments and Other charges.
Order Book
- Order book of USD 211 million by end Q1 2018
- 3D vessel booking for 2018 of 45 vessel months*
- Q2: 24 vessel months
- Q3: 19 vessel months
- Q4: 2 vessel months
- Plan to operate eight vessels during summer season - Ramform Sovereign mobilized early March
Financials Unaudited First Quarter 2018 Results
Segment Reporting and IFRS 15
- Following the Company's reorganization with effect from Q1 2018, PGS now has only one operating segment. Because the previous segments, Marine Contract and MultiClient, satisfied the aggregation criteria under IFRS 8 operating segments, this change in segments does not result in a change to the segment reporting for previous periods
- Following the implementation of the new accounting standard for revenues, IFRS 15, MultiClient pre-funding revenues are no longer recognized under the previously applied percentage of completion method. Instead, all such revenues are recognized at delivery of the final processed data, which is typically significantly later than the acquisition of the seismic data
- PGS management has, for the purpose of its internal reporting, continued to report according to the principle applied in 2017 and earlier years, where MultiClient pre-funding revenue is recognized on a percentage of completion basis, and the related amortization of MultiClient library based upon the ratio of aggregate capitalized survey cost to forecasted sales. Reference is made to Note 16 of the Q1 2018 earnings release for further information
- The quarterly numbers in this presentation relates to both As Reported in accordance with IFRS and Segment Reporting unless otherwise stated
Consolidated Key Financial Figures
|
Q1 |
Q
1 |
Full year |
| USD million (except per share data) |
2018 |
2017 |
2017 |
| As Reported under IFRS 15 |
|
|
|
| Revenues |
201.3 |
154.1 |
838.8 |
| EBIT as reported |
(7.3) |
(93.7) |
(242.0) |
| Net financial items |
(22.3) |
(9.3) |
(84.5) |
| Income (loss) before income tax expense |
(29.6) |
(103.0) |
(316.5) |
| Income tax expense |
(10.4) |
(3.5) |
(55.2) |
| Net income (loss) to equity holders |
(40.0) |
(106.5) |
(368.5) |
| Basic earnings per share (\$ per share) |
(\$0.12) |
(\$0.32) |
(\$0.97) |
| Net cash provided by operating activities |
73.4 |
30.0 |
427.2 |
| Cash Investment in MultiClient library |
53.7 |
33.6 |
213.4 |
| Capital expenditures (whether paid or not) |
4.0 |
101.6 |
131.1 |
| Total assets |
2,501.9 |
2,824.3 |
2,501.9 |
| Cash and cash equivalents |
38.4 |
38.8 |
38.4 |
| Net interest bearing debt |
1,150.9 |
1,093.2 |
1,150.9 |
|
|
|
|
| Segment Reporting* |
|
|
|
| Segment revenues |
197.8 |
154.8 |
838.8 |
| Segment EBITDA |
92.3 |
30.1 |
374.1 |
| Segment EBIT |
(22.7) |
(83.5) |
(147.1) |
* For definition of Segment Reporting numbers see Note 14 of the unaudited first quarter 2018 results, released on April 26, 2018.
The accompanying unaudited financial information has been prepared under IFRS. This information should be read in conjunction with the unaudited first quarter 2017 results, released on April 26, 2018.
Q1 2018 Operational Highlights
- Total Segment MultiClient revenues of USD 142.0 million, driven by higher MultiClient activity
- Pre-funding revenues of USD 58.6 million
- Pre-funding level of 109% on USD 53.7 million of MultiClient cash investment
- Late sales revenues of USD 83.5 million
- Marine contract revenues of USD 44.5 million
Strong MultiClient Late Sales
Strongest MultiClient late sales revenues since Q4 2014
Pre-funding and Late Sales Revenues Combined: Segment MultiClient Revenues per Region
Key Operational Segment Reporting Numbers
| Key Operational Segment Reporting Numbers |
|
|
|
|
|
|
2018 |
|
2017 |
|
|
| USD million |
Q
1 |
Q
4 |
Q3 |
Q
2 |
Q1 |
| Contract revenues |
44.5 |
40.5 |
43.5 |
95.9 |
61.4 |
| MultiClient Pre-funding |
58.6 |
107.7 |
101.8 |
50.2 |
39.7 |
| MultiClient Late sales |
83.5 |
70.5 |
47.8 |
77.4 |
39.3 |
| Imaging |
6.7 |
9.8 |
12.5 |
14.9 |
13.8 |
| Other |
4.6 |
7.4 |
2.0 |
2.1 |
0.6 |
| Total Revenues |
197.8 |
235.9 |
207.6 |
240.5 |
154.8 |
| Operating cost |
(105.5) |
(113.1) |
(99.0) |
(127.9) |
(124.7) |
| EBITDA* |
92.3 |
122.8 |
108.6 |
112.5 |
30.1 |
| MultiClient amortization |
(76.3) |
(121.6) |
(153.6) |
(80.5) |
(70.6) |
| Depreciation and amortization of long-term assets (excl. MC library) |
(38.7) |
(39.9) |
(27.1) |
(42.9) |
(44.5) |
| Impairment and loss on sale of long-term assets (excl. MC library) |
0.0 |
(55.8) |
(28.5) |
(9.9) |
0.0 |
| EBIT |
(22.7) |
(94.5) |
(100.6) |
(20.8) |
(85.0) |
|
|
|
|
|
|
| CAPEX, whether paid or not |
(4.0) |
(23.4) |
(16.6) |
(12.9) |
(101.6) |
| Cash investment in MultiClient |
(53.7) |
(54.0) |
(82.0) |
(43.8) |
(33.6) |
| Order book |
211 |
135 |
167 |
248 |
340 |
* 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 15 of the Q1 2018 earnings release. This information should be read in conjunction with the unaudited first quarter 2018 results released on April 26, 2018.
Seismic Streamer 3D Fleet Activity in Streamer Months: Vessel Utilization*
• 67% active vessel time in Q1 2018
– Based on 8 vessels
- 29% stacked/standby in Q1 2018
- Two vessels winter warm stacked
- Incurred idle time on PGS Apollo due to permitting issues in Indonesia
- Approximately 60% of 2018 active 3D vessel capacity to be allocated to MultiClient
Increased Activity, FX and Higher Oil Price Drives 2018 Gross Cash Cost
- 2018 gross cash cost initially expected to be approximately USD 575 million
- Higher activity, reimbursable cost projects, unfavorable currency development and a higher oil price (higher fuel prices) increases full year gross cash cost to approximately USD 600 million
- Estimate is sensitive to changes in exchange rates and oil price
Group Cost* Focus Delivers Results
- Q1 gross cash cost sequentially down but impacted by
- Net charge of steaming cost of USD 5 million
- Some of the cost reductions realized gradually over the quarter
- Reimbursable and project driven cost
- Some impact of FX rate changes and fuel prices
Full year 2018 expected to be approximately USD 600 million
*Gross cash costs are defined as the sum of reported net operating expenses (excluding depreciation, amortization, impairments 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." -15-
Consolidated Statements of Cash Flows Summary
|
Q1 |
Q1 |
Full year |
| USD million |
2018 |
2017 |
2017 |
| Cash provided by operating activities |
73.4 |
30.0 |
281.8 |
| Investment in MultiClient library |
(53.7) |
(33.6) |
(213.4) |
| Capital expenditures |
(14.1) |
(107.6) |
(148.8) |
| Other investing activities |
(7.1) |
21.5 |
62.1 |
| Net cash flow before financing activities |
(1.5) |
(89.7) |
(18.3) |
| Financing activities |
(7.4) |
66.8 |
3.7 |
| Net increase (decr.) in cash and cash equiv. |
(8.9) |
(22.9) |
(14.5) |
| Cash and cash equiv. at beginning of period |
47.3 |
61.7 |
61.7 |
| Cash and cash equiv. at end of period |
38.4 |
38.8 |
47.2 |
- Cash flow from operating activities of USD 73.4 million in Q1 2018
- Improvement from Q1 2017 driven by higher earnings
- Impacted by USD 14.3 million payment of severance and other restructuring provisions made in Q4 2017
- Targeting positive cash flow after debt service in 2018
Balance Sheet Key Numbers
|
March 31 |
March 31 |
Opening balance |
December 31 |
| USD million |
2018 |
2017 |
01.01.2018 |
2017 |
| Total assets |
2,501.9 |
2,824.3 |
2,567.6 |
2,482.8 |
| MultiClient Library |
671.7 |
626.7 |
668.0 |
512.3 |
| Shareholders' equity |
767.2 |
1,285.1 |
804.2 |
879.5 |
| Cash and cash equivalents (unrestricted) |
38.4 |
38.8 |
47.3 |
47.3 |
| Restricted cash |
42.4 |
111.6 |
43.3 |
43.3 |
| Liquidity reserve |
233.4 |
273.8 |
257.3 |
257.3 |
| Gross interest bearing debt |
1,231.5 |
1,242.7 |
1,229.5 |
1,229.5 |
| Net interest bearing debt |
1,150.9 |
1,093.2 |
1,135.8 |
1,135.8 |
- Liquidity reserve of USD 233.4 million
- Balance sheet restated January 1, 2018 due to IFRS 15
- Carrying value of MultiClient surveys in progress increased by USD 155.7 million
- Accrued revenues and other receivables decreased by USD 70.9 million, and deferred revenues increased by USD 160.1 million
- Shareholders' equity decreased by USD 75.3 million
Good Headroom to Maintenance Covenant
- Substantial reduction of Total Leverage Ratio ("TLR") during 2017 and Q1 2018
- Significant headroom to required level
- TLR of 2.99:1 as of March 31, 2018, compared to 3.67 as of December 31, 2017
- Expect to be in compliance going forward
Summary of Debt and Drawing Facilities
Debt and facilities as of March 31, 2018: Debt maturity profile:
Long-term Credit Lines and
Interest Bearing Debt |
Nominal
Amount |
Total
Credit
Line |
Financial Covenants |
|
USD 400.0m TLB, due 2021
Libor (minimum 0.75%) + 250 bps |
USD
384.0m |
|
None, but incurrence test: total
leverage ratio ≤
3.00x* |
|
Revolving credit facility
("RCF"), due 2020
Libor + margin of 325-625 bps
(linked to TLR) + utilization fee |
USD
205.0m |
USD
400.0m** |
Maintenance covenant: total
leverage ratio
4.75x Q4-17; 4.25x Q1-18,
thereafter reduced by 0.25x each
quarter to 2.75x by Q3-19 |
|
Japanese ECF, 12 year with
semi-annual instalments. 50%
fixed/ 50% floating interest rate |
USD
404.5m |
|
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* |
|
December 2018 Senior Notes,
coupon of 7.375% |
USD
26.0m |
|
None |
|
Operational Update and Market Comments
Unaudited First Quarter 2018 Results
Streamer Operations April 2018
Marine Seismic Market Outlook
- Higher oil price, improved cash flow among oil companies and unsustainable reserve replacement ratios are expected to benefit marine 3D seismic market fundamentals
- Strong MultiClient sales trend from Q4 2017 continues
- Still uncertainty regarding strength and timing for contract market recovery
- Coming winter season important to determine whether contract market improvement will continue
Seismic Market Activity
- Rising leads curve and consecutive monthly increases in tenders curve support improving market fundamentals
- Subject to short term fluctuations
-
Recent increase is primarily driven by Africa and Brazil
-
Volume of acquired marine 3D seismic is expected to remain at approximately same level in 2018 as in 2017
-
Better vessel utilization likely to compensate for less active capacity
-
Need for improved production from existing reservoirs drives 4D/reservoir seismic – UK, West Africa and Brazil among the most active 4D markets in 2018
- 4D projects are a core part of PGS Contract business and the Company is well positioned:
- Versatile Ramform fleet
- Multi-component streamers on all vessels
- Steerable sources and streamers
- Unique GeoStreamer based Imaging technology
- PGS completed four 4D jobs in Q1 2018
Marine Seismic Supply
- Average streamer capacity in 2018 is close to 50% lower than average streamer capacity in 2013
- Flexible winter capacity causes supply swings
- Schlumberger's exit from the seismic acquisition market will reduce supply further in the short term
- Low industry maintenance capex is causing the global streamer pool to shrink
Lower supply should benefit market balance in 2018
• Capital expenditures of ~USD 50 million
Q1 in Conclusion: Solid MultiClient Performance – Good Start to Achieve Positive 2018 Cash Flow
- Delivered the first quarter with new organization
- Solid MultiClient revenues from continued market recovery
- Still uncertainty regarding strength and timing for contract market recovery
- Encouraging bid pipeline for 2018
- Improving visibility
Positive 2018 cash flow after debt service remains key financial target
Thank You – Questions?
COPYRIGHT
The presentation, including all text, data, photographs, drawings and images (the "Content") belongs to Petroleum Geo-Services ASA, and/or its subsidiaries ("PGS") and may be protected by Norwegian, U.S., and international copyright, trademark, intellectual property and other laws. Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior written permission by PGS and applicable acknowledgements. In the event of authorized reproduction, no trademark, copyright or other notice shall be altered or removed. © 2015 Petroleum Geo-Services ASA. All Rights Reserved.
Appendix Main Yard Stays* Next Six Months
| Vessel |
When |
Expected
Duration |
Type of Yard Stay |
| Ramform Atlas |
October 2018 |
7 days |
5 year main class and
technical yard |
| Sanco Atlantic |
October 2018 |
22 days |
5 year main class and
technical |
-32-