DISCOVER MORE. RISK LESS.
Creating value for customers and shareholders
EMGS Capital Markets Day, 26 March 2014Roar Bekker, CEO
EMGS VISION
To make EM an integral and fully adopted part of the E&P workflow
Our vision is to make EM as fully adopted as seismic – to be used as a complementary technology.
By providing EM data integrated with other subsurface measurements we enable our customers to increase success in their exploration and development programs.
UNIQUELY POSITIONED FOR GROWTH
Technology and market leadership
- • Unique and proventechnology
- • Strong customer relationships
Operational excellence
- • Stable operations, low downtime
- • Scalable and flexible business model
- • Solid financial position
Growing the market
- •New customers
- • Increased adoptionadoption
Create shareholder value
TRIGGERS FOR GROWTH
WHAT CAN WE LEARN FROM THE SEISMIC INDUSTRY?
- • Full adoption of 3D seismic: 10-15 years
- Early adoption: drill/drop only
- Lack of interpretation tools slowed adoption
- • 3D exploration seismic main driver behind market growth the last decade due to:
- Low unit cost
- MC business model (40-50% of market)
- • Rapid development of multi/wide azimuth 3D due to inherent imaging constraints from the towed streamer method
Source: ABG Sundal Collier
PLENTY ROOM FOR GROWTH IN A USD10 BILLION MARKET
AGENDA
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EMGS MANAGEMENT TEAM
PLATFORMFOR GROWTH
Svein Knudsen, CFO
UNIQUELY POSITIONED FOR GROWTH
Technology and market leadership
- • Unique and proventechnology
- • Strong customer relationships
Operational excellence
- • Stable operations, low downtime
- • Scalable and flexible business model
- • Solid financial position
Growing the market
- •New customers
- • Increased adoption
Create shareholder value
UNIQUE AND PROVEN TECHNOLOGY
- • Technology considerably developed
- 2D to 3D major step
- Data quality improved clearer images
- Products developed to address spesific challenges
- Proof of Concepts studies testing technology on new applications/ broaden the scope
- • Track-record increase awareness
- EM measurements match well results
- Barents Sea: 21 of 21
- Brazil: 7 of 7
- Mexico: 5 of 5
CUSTOMERS' VIEWS
UNPARALELLED MARKET LEADERSHIP
- •Market leadership maintained
- •Technology developed over a decade
- •Strong patents
- •Close customer relationships
- • Operational experience increase every day
- More than 700 surveys
- In most basins world-wide
- Different water depths
STABLE OPERATIONS-OPEX & TECHNICAL DOWNTIME LOW AND PREDICTABLE
FLEXIBLE CHARTER AGREEMENTS
ASSET LIGHT - EQUIPMENT
Current equipment sets
- •4 sets in operation
- •Fifth set – readily available
- •Sixth set – JIP with Shell & Statoil
Full equipment set includes
- •150 receivers
- •Dual source and handling system
- •Processing capabilities
- •Lead time of ~9 months
- •CAPEX of USD ~25 million
MULTI-CLIENT – ESTABLISHED PART OF BUSINESS MODEL-POSITIVE RETURN ON INVESTMENTS
SOLID FINANCIAL POSITION
Balance sheet as at 31.12.13 Year-end 2013(USD million)
- •Cash at USD 56.5 million
- • Interest bearing debt at USD 56.8 million
- NOK 350 million bond loan due June 2016
- •Multi-client library of USD 28.1 million
2014 guiding
• CAPEX for 2014 expected <USD 15 million49% equity
STATUS ON 2014 REVENUE GUIDING
Revenue guiding of more than USD 200 million
- Mix of contract and multi-client projects
- •Backlog/ secured 2014 revenues per 25 March of USD 110 million
Expected vessel schedule as of 25 March 2014
UNIQUELY POSITIONED FOR GROWTH
TECHNOLOGY APPLICATIONS
David Neser, COO/CTO
OUTLINE
Customer adoption and usage
- •Customer revenue distribution
- •Sensitivity analysis and survey design
- •Electromagnetics in the E&P workflow
- • Electromagnetics & seismic integration
- Probability of success (drilling)
- Volumetrics
- •Adoption bottlenecks & solutions
UNIQUELY POSITIONED FOR GROWTH
GROWING THE MARKET BY CHANGING OUR APPROACH TO CUSTOMERS
EM: CAPABILITY MATURITY
SALES PIPELINE IMPROVED – EASIER AND SHORTER
CONTROLLED SOURCE EM SENSITIVITY PLOTS
CONTROLLED SOURCE EM SENSITIVITY PLOTS
CONTROLLED SOURCE EM SURVEY DESIGN
EM: CAPABILITY MATURITY
ELECTROMAGNETICS IN THE E&P WORKFLOW
ELECTROMAGNETICS IN THE E&P WORKFLOW
RESERVOIR GEOLOGY
Trap, reservoir, charge and seal
Source: www.wikipedia.com
CSEM & SEISMIC INTEGRATION
- • Low discovery rate today
- 8/9 of every 10 exploration wells fail to find commercial levels of hydrocarbons
- • Two main reasons for failure
- Seal: 45%
- Charge: 30%
CSEM & SEISMIC INTEGRATION
- • Low discovery rate today
- 8/9 of every 10 exploration wells fail to find commercial levels of hydrocarbons
- • Two main reasons for failure
- Seal: 45%
- Charge: 30%
- • Majority time/money spent on Trap & Reservoir (Seismic)
- • Less time/money is spent on seal and charge
PROBABILITY OF SUCCESS
Existing PoS updated by electromagnetic data, but qualified by:
- •Data sensitivity
- •Data quality
- Updated PoS Imaging robustness
- •Interpretability
Prior PoS
BLOCK PROSPECTIVITY CONFIRMED WITH 3D EM - WISTING
VOLUME PREDICTION PERFORMANCE
VOLUMETRICS: WHY ARE AREA AND NET PAY SO VALUABLE?
Source: Peter R. Rose, Risk Analysis and Management of petroleum exploration ventures, 2001
Area and Net Pay (the Net Rock Volume) are typically the two main uncertainties in reserves estimates during the exploration phase
NET ROCK VOLUME
The volume of reservoir rock containing hydrocarbon hydrocarbons (ie Net s Rock Volume) is the main olume) driver to CSEM response.
A CSEM result reduces the rangeof estimated reserves
WHERE DOES CSEM ADD THE MOST QUANTITATIVE VALUE?
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ELECTROMAGNETICS IN THE E&P WORKFLOW
ELECTROMAGNETICS IN THE E&P WORKFLOW
EMGS BARENTS SEA PROGRAM
TECHNOLOGY IN THE EXPLORATION DECISION-MAKING PROCESS
EM TECHNOLOGY FOCUS 1: ROBUST CORE PRODUCT
EM TECHNOLOGY FOCUS 2: INTEGRATED/ JOINT PRODUCTS
TECHNOLOGY ADOPTION BOTTLENECK: USING EM DATA TO MAKE DECISIONS
EMGS: EXPERTISE, WORKFLOWS AND SOFTWARE ALIGNED TO MEET EXPLORATION NEEDS
EMBEDDED CSEM ASSESSMENT SOFTWARE
2014 Software development
Volumetric assessment software
Prior PoS
SUMMARY
- • Revenue growth potential is significant based upon customer revenue profile
- • Key customers understand value and invest in CSEM heavily
- • Technical sales support required to make clear the value proposition
- • CSEM provides unique measurement & has excellent results
- • CSEM complements existing seismic technology
- • Value proposition requires adjustment in customer thinking & workflows
- •Bottleneck is in adoption not technology
- • Ongoing solutions:
- Sales organization, process & tools
- Software development to support customer workflows
CUSTOMER APPROACH
Vincent Vieugue, EVP Sales & Marketing
GROWING THE MARKET BY CHANGING OUR APPROACH TO CUSTOMERS
PRIORITIES TO ACCELERATE GROWTH
ADDRESS TARGETED MARKETS
Global E&P expenditure ~\$644 b in 2013 - growth 7%Seismic spending average 2% of Total E&P
Offshore Reservoir and Seimic market estimated growth \$14,2 b in 2013 to \$16,5 b in 2016
Priority for EMGS on high expenditure market
| USD million |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
| US GoM |
3096 |
2837 |
2 3 4 3 |
1555 |
2003 |
3567 |
3720 |
4 4 0 3 |
4495 |
4801 |
4 2 2 0 |
| Angola |
425 |
470 |
667 |
507 |
597 |
566 |
724 |
808 |
804 |
934 |
992 |
| Australia |
474 |
777 |
646 |
663 |
660 |
1 1 8 3 |
1407 |
858 |
849 |
1658 |
1548 |
| Brazil |
1 1 9 0 |
1408 |
1 1 8 4 |
1410 |
1626 |
2017 |
2581 |
2565 |
2 2 6 2 |
2 2 9 2 |
2506 |
| China |
783 |
1077 |
816 |
344 |
458 |
361 |
459 |
433 |
436 |
526 |
399 |
| Russia |
161 |
156 |
89 |
358 |
239 |
304 |
335 |
327 |
436 |
384 |
503 |
| United Kingdom |
998 |
1 1 8 5 |
468 |
519 |
704 |
741 |
879 |
756 |
880 |
938 |
770 |
| Canada |
151 |
353 |
156 |
190 |
107 |
229 |
329 |
377 |
385 |
483 |
627 |
| India |
259 |
225 |
259 |
245 |
146 |
462 |
504 |
409 |
696 |
495 |
561 |
| Indonesia |
212 |
199 |
263 |
218 |
433 |
538 |
347 |
512 |
591 |
524 |
644 |
| Kazakhstan |
79 |
62 |
19 |
29 |
23 |
19 |
29 |
24 |
80 |
317 |
371 |
| Malaysia |
205 |
244 |
362 |
292 |
251 |
303 |
421 |
417 |
544 |
853 |
548 |
| Mexico |
390 |
505 |
417 |
291 |
337 |
484 |
407 |
409 |
361 |
476 |
563 |
| United Arab Emirate |
40 |
97 |
43 |
37 |
95 |
154 |
163 |
144 |
275 |
283 |
267 |
| Azerbaijan |
52 |
21 |
47 |
131 |
71 |
40 |
296 |
139 |
76 |
80 |
154 |
| East Africa |
53 |
138 |
37 |
115 |
181 |
574 |
931 |
705 |
621 |
673 |
816 |
| Middle East |
190 |
246 |
310 |
290 |
238 |
168 |
199 |
225 |
234 |
255 |
297 |
| West Africa |
271 |
556 |
613 |
273 |
348 |
480 |
506 |
716 |
681 |
479 |
532 |
| Total |
9 0 2 7 |
10 556 |
8737 |
7467 |
8517 |
12 189 |
14 2 38 |
14 2 2 7 |
14 70 6 |
16 451 |
16 3 20 |
REINFORCE CUSTOMER ENGAGEMENT
- • Implement strategic account plan targeting 6 IOCs and 8 NOCs
- • Develop partnership with other services companies (TGS, WesternGeco)
- • Building an organisation supporting operators processes
- • Establish best practises
- input to development
- EM data integration in Workflow
TAILORED APPROACH TO STRATEGIC ACCOUNTS
STRENGTHEN SALES TEAM
INCREASE AWARENESS
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PRIORITIES TO ACCELERATE GROWTH
VALUE IN MULTI-CLIENT
David Hicks, President Western Hemisphere
MULTI-CLIENT – BENEFIT TO BOTH CUSTOMERS AND EMGS
- • Multi-client projects are crucial to increasing the adoption of EM technology
- Acquiring data in the best areas
- • Good opportunities for cooperating with seismic players
- Integration of EM and seismic data is key going forward
- Part of the same conversation
- • Multi-client projects give a lower barrier to entry for customers
- Lower financial entry for companies large and small
CURRENT MULTI-CLIENT REGIONS
BRAZIL – CURRENT AND FUTURE
- •Frontier exploration areas
- •Active market
- •EM Library over 15,000 km2
- • Foz do Amazonas basin
- Working closely with Spectrum Geophysical
THE GULF OF MEXICO
- • Value of work with Pemex
- Unparalleled laboratory
- • Daybreak MC Survey
- 160 blocks covering Alaminos Canyon (3,000 km2+)
- Both CSEM and MT for aiding seismic imaging
- Difficult area for imaging
- Lease sale Fall 2014
- Pre-funded
PERDIDO FOLD BELT
DEPTH PROGRESSIONSEISMIC INTERPRETATION, SALT
PERDIDO TREND PLAY CONCEPTS
STRUCTURAL IMAGING
- • Keathley Canyon
- Seismic Imaging project with Schlumberger
- Opens up salt and other difficult to image provinces around globe (GOM, Angola, Brazil, India...)
- •Structural Imaging as a new product line
EXAMPLE GOM
Salt imaging using 3D CSEM data
- •Identify salt feeder
- •Differentiate salt composition with respect to resistivity
- •Identify connections between interpreted individual salt bodies
Morten et al., EAGE London 2013
DEPTH SLICE MOVIE
DEPTH PROGRESSIONRESIDUAL SALT INTERPRETATION
BARENTS SEA - EM APPLICATION IN NCS LICENSING ROUNDS
HOOP AREA AND TGS
- • Joint venture in 17 blocks with TGS
- •30% Investment
- • Detailed seismic / EM integration
NEW OPPORTUNITIES
EAST CANADA MULTI-CLIENT PROGRAM
- • 13,500 km 2 multi-year, multimulticlient 3D EM campaign with NALCOR starting this summer
- • Competitive advantage to subscribers exploring for the next high impact discovery
- • Improving rock property knowledge, geologic understanding and reserve estimations
MULTI-CLIENT NEW OPPORTUNITES
- •Uruguay
- New bid round in 2015
- Licensing of EM will count as working units for the exploratory work program commitment
- Use the integrated interpretation of seismic and 3D EM to more effectively de-risk exploration efforts and optimize development plans
- •Greenland
- • Gulf of Mexico (all of it)
- Modern, regional data set
- Bid round 2015
- Multiple US GOM opportunties
PARTNERING FOR SUCCESS
JOINING THE CONVERSATION
- • Finding commercial oil and gas deposits isn't getting any easier
- • Integrating resistivity data with other traditional exploration tool sets is helping
- • Partnering and getting closer to the seismic players has many benefits
- Brazil: Spectrum
- GOM: Schlumberger
- Barents: TGS, MCG
- • Partnering with NOCs and Ministries
- The muli-client model is a cooperation model
- EMGS presents an experienced MC partner
SUMMARY
- •Multi-client library development is one of the key strategies for EMGS
- •Long-term value for Company
- • Leads integration and partnering approach
- Over \$1B in seismic MC investment in 2014
SUMMARY & CLOSING REMARKS
Roar Bekker, CEO
OUTLOOK
- •Good contract coverage for 1H14
- • Strong prefunding expected for MC projects in Norway, US and Canada
- • Increased upside from late sales due to expansion and diversity of MC library
- • Maintain full year 2014 revenue guiding of more than USD 200 million and return to profitable growth
- • Long term growth potential intact –encouraging signs of accelerated adoption rate and market visibility
EMGS: A UNIQUELY POSITIONED INVESTMENT CASE
We have a unique platform for growth
•Stable operations an a scalable and flexible business model
Our leading technology adds value
- • EM and seismic have complementary attributes - the combination enables customers to increase drilling success
- •EM adds value in several steps of the E&P work flow
Multi-client is critical for increased adoption and good business
- •Easier and low cost entry for new customers to test the EM data
- •Create good showcases
- •Good opportunities for partnerships with seismic players
We are enhancing our platform for growth with a more focused sales strategy
- •Targeting strategic accounts and selected geographical areas
- •Strengthening the sales organisation and aligning competence
EXECUTIVE MANAGEMENT TEAM
Roar Bekker,CEO
- • Schlumberger 1984-2007: Seismic operations, seismic processing, marketing and sales
- •MsC
- • Joined EMGS as COO in 2007
- •CEO from 2009
Svein Knudsen, CFO
- • PGS 1994-2005: VP Finance and Treasury
- •Joined EMGS in 2005
- • BSc in business and administration from in Geophysics Appalachian State University (ASU) in North Carolina
David Neser, COO & CTO
- • Schlumberger 1990-2012: Operations, business development, sales and new product development.
- • BSc in electrical engineering and MSc in IT
- •Joined EMGS in May 2012
EXECUTIVE MANAGEMENT TEAM
Vincent Vieugue, EVP Sales & Marketing
- • Roxar 2006-2013: Vice President of Global Sales and Marketing
- • M.Sc in Oceanography and in Geophysics from respectively •Toulon and Strasbourg Universities in France.
- •Joined EMGS January 2014
Ole Heggheim, EVP Strategic Development
- • Aker Yards ASA (renamed to STX Europe ASA):CFO, EVP Business Development
- •PGS, VP Finance
- MBA from University of Texas and Cand. Mag from University of Bergen
- •Joined EMGS January 2013