First Quarter 2015 Earnings Presentation
- This presentation contains forward looking information
- Forward looking information is based on management assumptions and analyses
- 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 2015 results and the disclosures therein
Robust MultiClient Sales Strong Financial Structure
- Financial performance:
- EBITDA of USD 124.8 million
- MultiClient sales of USD 143.3 million, of which USD 56.7 million were late sales
- Cash position further strengthened with a liquidity reserve of USD 558.9 million
- Weak Q1 vessel utilization impacted financial performance negatively, including the Marine contract EBIT margin
- Ramform Explorer and Ramform Challenger will be cold-stacked after the North Sea season
- Cost savings target substantially increased to drive USD 220 million of cost reduction in 2015
Full year 2013 EBITDA guidance of approximately USD 850 million Full year 2015 guidance reiterated – market uncertainty remains
Financial Summary
210 216 - USD million
*EBITDA, when used by the Company, means EBIT less other operating (income) expense, impairments of long-term assets and depreciation and amortization. **Excluding impairments of USD 39.7 million in Q4 2014, USD 25.0 million in Q3 2014, USD 9.1 million in Q2 2014, USD 15 million in Q4 2013, USD 0.1 million in Q4 2012 and reversal of impairment of USD 0.9 million in Q2 2012.
Order Book
Financials
Unaudited First Quarter 2015 Results
Condensed Consolidated Statement of Operations Summary
|
Q1 |
Q1 |
|
Full year |
| USD million (except per share data) |
2015 |
2014 |
% change |
2014 |
| Revenues |
251.1 |
292.5 |
-14 % |
1 453.8 |
| EBITDA* |
124.8 |
138.5 |
-10 % |
702.6 |
| Operating profit (EBIT) ex impairment charges |
10.9 |
45.2 |
-76 % |
178.0 |
| Operating profit (EBIT) |
10.9 |
45.2 |
-76 % |
104.2 |
| Net financial items |
(20.8) |
(32.5) |
36 % |
(87.5) |
| Income (loss) before income tax expense |
(10.0) |
12.7 |
-179 % |
16.7 |
| Income tax expense (benefit) |
9.5 |
8.1 |
17 % |
67.6 |
| Net income to equity holders |
(19.5) |
4.6 |
-524 % |
(50.9) |
| EPS basic |
(\$0.09) |
\$0.02 |
-550 % |
\$0.24 |
| EBITDA margin* |
49.7 % |
47.4 % |
|
48.3 % |
| EBIT margin ex impairment charges |
4.3 % |
15.5 % |
|
12.2 % |
*EBITDA, when used by the Company, means EBIT less other operating (income) expense, impairments of long-term assets and depreciation and amortization.
The accompanying unaudited financial information has been prepared under IFRS. This information should be read in conjunction with the unaudited first quarter 2015 results, released on April 30, 2015.
Stronger USD Negatively Impacts Net Financial Items and Tax
- Q1 financial expenses include a foreign currency loss of USD 4.7 million
- Strengthening of the USD negatively impacted the Company's marked to market currency positions
- Q1 loss primarily caused by net exposure to Brazilian Real
- A stronger USD has a significant positive impact on the cost base
- Reported tax expense of USD 9.5 million:
- Foreign taxes and withholding taxes where full credits were not achievable in Norway/UK
- Tax assets reduced due to a higher USD rate
- Losses, primarily foreign exchange driven, in some countries where deferred tax benefit is not recognized
Q1 2015 Operational Highlights
Contract revenues MultiClient revenues
- Marine contract revenues of USD 68.8 million and an EBIT margin of negative 40%
- The marine contract EBIT margin is significantly impacted by the standby cost incurred in the quarter
- Total MultiClient revenues of USD 143.3 million
- Pre-funding revenues of USD 86.6 million
- Pre-funding level of 135% expected to come down in Q2 due to project mix
- Late sales revenues of USD 56.7 million a robust performance in a challenging market proving the attractiveness of PGS MultiClient library
MultiClient Revenues per Region Pre-funding and Late Sales Revenues Combined
- Robust MultiClient sales performance in Q1 2015
- Pre-funding revenues were highest in Asia Pacific and Africa, driven by three highly pre-funded projects
- Europe was the main contributor to late sales, supported by Asia Pacific and Africa
51% of active 3D vessel capacity allocated to MultiClient in Q1 2015
|
2015 |
2014 |
|
|
|
| USD million |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
| Contract revenues |
68.8 |
171.8 |
238.6 |
171.5 |
116.0 |
| MultiClient Pre-funding |
86.6 |
86.4 |
55.4 |
74.8 |
74.2 |
| MultiClient Late sales |
56.7 |
120.0 |
63.9 |
60.3 |
64.8 |
| Imaging |
30.3 |
36.2 |
30.6 |
24.3 |
28.0 |
| Other |
8.7 |
15.7 |
5.7 |
6.1 |
9.5 |
| Total Revenues |
251.1 |
430.1 |
394.2 |
337.0 |
292.5 |
| Operating cost |
(126.3) |
(218.3) |
(212.5) |
(166.4) |
(154.0) |
| EBITDA* |
124.8 |
211.8 |
181.7 |
170.6 |
138.5 |
| Other operating income |
0.2 |
0.2 |
0.2 |
0.3 |
0.2 |
| Impairment of long-term assets |
|
(39.7) |
(25.0) |
(9.1) |
|
| Depreciation |
(41.6) |
(56.8) |
(50.5) |
(44.0) |
(29.8) |
| MultiClient amortization |
(72.5) |
(155.1) |
(53.9) |
(71.6) |
(63.7) |
| EBIT |
10.9 |
(39.7) |
52.5 |
46.2 |
45.2 |
|
|
|
|
|
|
| CAPEX, whether paid or not |
(41.5) |
(36.9) |
(53.1) |
(149.4) |
(131.9) |
| Cash investment in MultiClient |
(64.0) |
(57.9) |
(70.4) |
(99.6) |
(116.2) |
| Order book |
394 |
410 |
466 |
558 |
610 |
**EBITDA, when used by the Company, means EBIT less other operating (income) expense, impairments of long-term assets and depreciation and amortization.
The accompanying unaudited financial information has been prepared under IFRS. This information should be read in conjunction with the unaudited first quarter 2015 results released on April 30, 2015.
Vessel Utilization Seismic Streamer 3D Fleet Activity in Streamer Months
- Active time in Q2 2015 expected to be approximately 80%, due to idle time, permit delays and steaming
- Approximately 45% of active 3D capacity now expected to be used for MultiClient projects for the full year 2015
63% active vessel time in Q1 2015
Group Cost* Focus Delivers Results
- Cost savings initiatives
- Currency and fuel price
- Q1 cost lower than trendline due to:
- Lower cost for vessels stacked, at yard or on standby
- Deferral of cost on a project where revenue will be recognized in later quarters
- Net deferral of steaming cost
- One off effects from changes to benefit plans
- With higher fleet utilization and reversal of cost deferrals, cost level expected to increase by approximately USD 40 million in Q2
Quarterly cost significantly down in 2015 compared to 2013 and 2014
*Amounts show the sum of operating cost and capitalized MultiClient cash investment.
Proactive Cost Reductions Continue in 2015
- Cash cost in 2015 is now expected to be approximately USD 220 million lower than in 2014
- PGS previously targeted a reduction of USD 150 million
- Cold-stacking of Ramform Explorer and Ramform Challenger, foreign exchange, a more wide-ranging reductions in staff and lower variable project costs contribute to a further reduction in costs
- Net staff reduction of more than 200 in 2015
*Other cost reductions net includes effects of office closures/reloactions, staff reductions , other initiatives and lower project management costs, partly offset by increased cost from planned growth measures in 2015, compared to 2014.
Consolidated Statements of Cash Flows Summary
|
Q1 |
Q1 |
Full year |
| USD million |
2015 |
2014 |
2014 |
| Cash provided by operating activities |
212.4 |
182.1 |
584.3 |
| Investment in MultiClient library |
(64.0) |
(116.2) |
(344.2) |
| Capital expenditures |
(30.7) |
(144.2) |
(383.4) |
| Other investing activities |
(1.7) |
(5.2) |
(58.7) |
| Financing activities |
(21.8) |
28.3 |
(7.1) |
| Net increase (decr.) in cash and cash equiv. |
94.2 |
(55.2) |
(209.1) |
| Cash and cash equiv. at beginning of period |
54.7 |
263.8 |
263.8 |
| Cash and cash equiv. at end of period |
148.9 |
208.6 |
54.7 |
- Q1 2015 cash provided by operating activities positively impacted by a strong improvement in working capital
- The working capital improvement is mainly due to cash collection of MultiClient sales recorded in Q4 2014
- Q1 2015 capital expenditures primarily relate to the Ramform Titan-class new builds, GeoStreamer and yard stay for Ramform Explorer
The accompanying unaudited financial information has been prepared under IFRS. This information should be read in conjunction with the unaudited first quarter 2015 results released April 30, 2015.
Balance Sheet Key Numbers – Strong Financial Position
|
March 31 |
March 31 |
December 31 |
| USD million |
2015 |
2014 |
2014 |
| Total assets |
3 501.0 |
3 562.0 |
3 563.0 |
| MultiClient Library |
715.2 |
666.3 |
695.2 |
| Shareholders' equity |
1 881.0 |
2 069.3 |
1 901.6 |
| Cash and cash equiv. |
148.9 |
208.6 |
54.7 |
| Restricted cash |
79.3 |
97.8 |
92.2 |
| Liquidity reserve |
558.9 |
708.6 |
454.7 |
| Gross interest bearing debt |
1 192.8 |
1 089.8 |
1 209.1 |
| Net interest bearing debt |
955.9 |
760.4 |
1 048.0 |
- Liquidity reserve of USD 558.9 million
- In addition the new builds are fully funded with USD 266.5 million of undrawn facilities to cover remaining yard payments
- Conservative policy to plan for net debt below 1xEBITDA in a strong market and 2xEBITDA in a weak market
- Shareholders' equity at 54% of total assets
Strong balance sheet – well positioned to handle the challenging market
- The accompanying unaudited financial information has been prepared under IFRS. This information should be read in conjunction with the unaudited first quarter 2015 results released on April 30, 2015.
Attractive Debt Structure – No Maturities Before 2018
Long term Credit Lines and Interest
Bearing Debt |
Nominal
Amount as
of March 31,
2015 |
Total
Credit Line |
Financial Covenants |
USD 400.0 million Term Loan ("TLB"), Libor
(minimum 0.75%) + 250 basis points, due 2021 |
USD 396.0
million |
|
None, but incurrence test:
total leverage ratio
< 3.00:1 |
Revolving credit facility ("RCF"), due 2018
70 bps commitment fee on undrawn amount
Libor + margin of 200-235 bps on drawn amount |
USD 90.0
million |
USD 500.0
million |
Maintenance covenant:
total leverage ratio
< 2.75:1 |
Japanese ECF, 12 year with semi-annual
installments. 50% fixed/ 50% floating interest
rate |
USD 256.8
million |
USD 523.3
million |
None, but incurrence test
for loan 3&4:
Total leverage ratio < 3.00:1
and
Interest coverage ratio >
2.0:1 |
2018 Senior Notes, coupon of 7.375% and
callable from 2015 |
USD 450.0
million |
|
None, but incurrence test:
Interest coverage ratio
> 2.0:1 |
Operational Update and Market Comments
Unaudited First Quarter 2015 Results
Current Market Characteristics
- Cautious spending pattern among oil companies continues to impact seismic demand
- Low visibility in all regions
- Very low prices for contract work
- Further capacity reduction needed to balance the market
- The weak market is expected to continue well into 2016
Very Low Marine Contract Bidding Activity
Active Tenders All Sales Leads (Including Active Tenders)
- Very low bidding activity impacts industry pricing and utilization
- Graph excludes an increasing share of MultiClient projects
- Despite low industry activity level, PGS' bid success rate has been satisfactory in Q1 2015
Source: PGS internal estimate as of end March 2015. Value of active tenders and sales leads are the sum of active tenders and sales leads with a probability weight and represents Marine 3D contract seismic only.
Global Supply and Demand Trends
- In 2014 sq.km acquired declined 11% compared to 2013
- 15-20% decline in sq.km acquired is expected in 2015, compared to 2014
- Average 2015 streamer capacity now expected to come down by 13%, compared to 2014
- Approximately 10-15% additional capacity from current level needs to be decommissioned to balance supply with near term market demand
Source of both graphs: PGS internal estimates. Capacity increases are calculated based on average number of streamers in one year compared to average number of streamers the previous year.
Cold-Stacking Ramform Explorer and Ramform Challenger
- Ramform Explorer and Ramform Challenger are booked through the North Sea season and will be coldstacked thereafter
- Will improve fleet performance and utilization
- Quarterly cost savings in the range of USD 15-20 million
- GeoStreamer equipment will be used to upgrade Ramform Sterling
- Reduces 2016 CAPEX for in sea equipment
- Rollover of crew to Ramform Tethys, scheduled for delivery Q1 2016
Good MultiClient Sales Performance from All Vintages
- Strong sales progress for all vintages
- Moderate net book values (NBV) for surveys completed 2010- 2015
- Work In Progress (WIP) approximately two years on average
- Amortization is primarily based on the ratio of cost to forecasted sales
- Full year 2015 amortization rate expected to be approximately 55%
Streamer Operations April 2015
In Conclusion: Well positioned to Navigate Through the Challenging Market
- Robust balance sheet
- No debt maturities before 2018
- Reducing costs further
- Cost effective operations
- Improved productivity
- Attractive MultiClient library
- Satisfactory contract bid success rate
Competitively Positioned – Performance Through the Cycle
• EBITDA in the range of USD 550-700 million
Thank you – Questions?
Appendix PGS Seismic Fleet
S
Ramforms Conventional
PGS Apollo
Ramform Sterling Ramform Sovereign
Ramform Valiant Ramform Viking
Ramform Explorer – to be cold stacked in 2H 2015
Ramform Vanguard
2D/EM/Source
Sanco Spirit
Atlantic Explorer
PGS fleet – Flexible, with high towing capacity
Appendix Productivity Leadership is Key for Differentiation
Significant vessel decommissioning
Source: The cash cost curve is based on PGS' internal estimates and typical number of streamer towed, and excludes GeoStreamer productivity effect. The graph shows all seismic vessels operating in the market and announced new-builds. The Ramform Titan-class vessels are incorporated with 15 streamers, S-class with 14 streamers and the V-class with 12 streamers. -29-
Appendix Rescheduled Delivery Times for New Builds
- Delivery times for Ramform Tethys and Ramform Hyperion rescheduled to Q1 and Q3 2016
- Reduces 2015 CAPEX by at least USD 160 million compared to previous baseline
- No cost impact for PGS
Appendix Main Yard Stays Next 12 Months
| Vessel |
When |
Expected
Duration |
Type of Yard Stay |
| Sanco Spirit |
June 2015 |
Approximately
10 days |
Renewal class
(vessel owner Sanco's
cost) |
Ramform
Sterling |
October 2015 |
Approximately
14 days |
Upgrade to
GeoStreamers |
Ramform
Valiant |
December 2015 |
Approximately
14 days |
Intermediate class |