Unaudited Fourth Quarter and Preliminary Full Year 2013 Results
Unaudited Third Quarter 2013 Results
Oslo, October 25, 2013
Oslo, February 13, 2014
- 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 fourth quarter and preliminary full year 2013 results and the disclosures therein
Improved Profitability
- 2013 financial performance:
- EBIT of USD 382.1 million. A margin of 25%
- CF from operations of USD 775.3 million
- EPS of USD 1.11, up 29% from 2012
- Record MultiClient late sales revenues
- Successful introduction of the new Ramform Titan–class vessels
- 2014 EBITDA guidance of USD 900-950 million reiterated
The Board will propose a dividend for 2013 of NOK 2.30 per share Full year 2013 EBITDA guidance of approximately USD 850 million – up 39%
Financial Summary
*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 15 million in Q4 2013, USD 0.1 million in Q4 2012, USD 2.6 million in Q4 2011 and reversal of impairment of USD 0.9 million in Q2 2012.
Strong Order Book
Close to 70% of capacity booked for 2014
*As of February 4, 2014
2008 – 2015 First Phase of the Industrial Approach: Performance Through the Cycle - Getting it Right
- 3D fleet renewal and growth
- Average vessel age reduced from 16.2 to 9.2 years
- Average streamer per vessel increased from 8.5 to 12.9
- Total number of streamers increased from 94 to 155
- Streamer based market share increased from 22% to 24% (assuming certain retirements in rest of period)
- Rollout of GeoStreamer Technology (last vessel to be upgraded in 2016)
- MultiClient focus and growth (in size and profitability)
- Emergence of new GeoStreamer based Imaging technologies
- Technology pipeline with further profit potential
- Taking the industry lead in HSE and Quality
- Substantial increase of financial robustness and initiation of dividend payments
Increased productivity and technological differentiation
2016 and Beyond: Becoming Fully Industrialized
- Financial focus on profit, free cash flow and ROCE - not vessel market share growth
- Leveraging GeoStreamer equipped fleet and increased productivity differentiation
- Continued MultiClient revenue growth and focus on return on invested capital
- GeoStreamer Imaging as new differentiator
- Continued roll-out of new technologies
- HSE, Cost and Quality leadership
Increasing return on capital and dividend capacity
Investing in a Growth Case
- EPS growth in focus going forward
- Good potential for further growth in profitability from current levels
- Dividend growth will be a priority
- PGS well positioned to improve return on capital and dividend capacity by having:
- A strong balance sheet
- Increased earnings capacity from new builds
- Technology differentiation
Ramform Titan-class Delivers Attractive Returns
- The Ramform Titan meeting expectations:
- Performance and efficiency
- Ability to fully exploit GeoStreamer technology
- Safety
- Crew comfort
- With current contract performance through the vessel's life:
- Payback time of less than 5* years
- IRR better than initial plan and above 20%*
High quality assets generating high returns
Financials
Unaudited Fourth Quarter and Preliminary Full year 2013 Results
Condensed Consolidated Statement of Operations Summary
|
Q4 |
Q4 |
|
Full year |
Full year |
|
| USD million (except per share data) |
2013 |
2012 |
% change |
2013 |
2012 |
% change |
| Revenues |
359.5 |
360.1 |
0 % |
1501.6 |
1518.3 |
-1 % |
| EBITDA* |
201.0 |
162.2 |
24 % |
828.9 |
776.2 |
7 % |
| Operating profit (EBIT) ex impairment charges |
81.4 |
60.7 |
34 % |
397.1 |
293.0 |
36 % |
| Operating profit (EBIT) |
66.4 |
60.6 |
10 % |
382.1 |
293.8 |
30 % |
| Net financial items |
(21.6) |
(15.6) |
-38 % |
(54.2) |
(65.3) |
17 % |
| Income (loss) before income tax expense |
44.8 |
45.0 |
0 % |
327.9 |
228.5 |
44 % |
| Income tax expense (benefit) |
14.7 |
4.8 |
206 % |
89.6 |
42.9 |
109 % |
| Net income to equity holders |
30.1 |
40.1 |
-25 % |
238.3 |
185.5 |
28 % |
| EPS basic |
\$0.14 |
\$0.19 |
-26 % |
\$1.11 |
\$0.86 |
29 % |
| EBITDA margin* |
55.9 % |
45.0 % |
|
55.2 % |
51.1 % |
|
| EBIT margin |
18.5 % |
16.8 % |
|
25.4 % |
19.4 % |
|
*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 fourth quarter and preliminary 2013 results, released on February 13, 2014.
- USD 15 million impairment of source vessel Polar Sea
- Net financial items impacted by USD 5 million write down of associated companies
- Tax rate of 33% in Q4 2013, higher than trend line
- No tax deduction on the Polar Sea impairment
- USD 3.9 million deferred tax charge due to reduced corporate income tax rate in Norway
- Foreign exchange movements
Contract revenues MultiClient revenues 158.6 138.1 164.9 165.4 174.9 128.5 163.8 156.3 207.3 192.8 155.7 121.7 0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 0.0 50.0 100.0 150.0 200.0 250.0 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 USD million Contract revenues % 3D capacity allocated to contract 34.3 89.7 61.1 38.4 108.5 150.2 121.3 81.4 92.6 65.2 108.4 94.3 18.0 69.6 83.0 107.6 49.4 85.9 65.7 65.8 58.9 90.2 63.0 99.2 0 % 50 % 100 % 150 % 200 % 250 % 0 50 100 150 200 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 USD million MultiClient pre-funding MultiClient late sales Pre-funding as % of MC cash investments
Q4 2013 Highlights
- Marine Contract revenues of USD 121.7 million, with an EBIT margin of 22%
- Total MultiClient revenues of USD 193.5 million in Q4 2013
- Q4 pre-funding of 85% of MultiClient cash investment
MultiClient Revenues per Region Pre-funding and Late Sales Revenues Combined
- Q4 2013:
- Pre-funding revenues were highest in South America, Africa and Asia Pacific
- Strong late sales in Europe, South America and North America
- Full year 2013:
- Pre-funding level of 97%
- Record MultiClient late sales revenues
46% of total vessel time used for MultiClient in Q4 2013
Vessel Utilization Seismic Streamer 3D Fleet Activity in Streamer Months
- Q1 2014 will see seasonal effect of moving vessels into the North Sea and steaming of Ramform Atlas from Japan to Europe
- Approximately 35% of active 3D vessel capacity allocated to MultiClient for the full year 2014
- More capacity allocated to MultiClient in Q1 vs. the consecutive quarters of 2014
87% active vessel time in Q4 2013
|
2013 |
|
|
|
2012 |
|
|
|
| USD million |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
| Contract revenues |
121.7 |
155.7 |
192.8 |
207.3 |
156.3 |
163.8 |
128.5 |
174.9 |
| MultiClient Pre-funding |
94.3 |
108.4 |
65.2 |
92.6 |
81.4 |
121.3 |
150.2 |
108.5 |
| MultiClient Late sales |
99.2 |
63.0 |
90.2 |
58.9 |
65.8 |
65.7 |
85.9 |
49.4 |
| Data Processing |
32.6 |
34.3 |
28.8 |
27.1 |
32.3 |
33.1 |
31.7 |
27.3 |
| Other |
11.7 |
4.2 |
4.7 |
8.9 |
24.3 |
4.3 |
8.6 |
4.9 |
| Total Revenues |
359.5 |
365.6 |
381.7 |
394.8 |
360.1 |
388.3 |
404.8 |
365.0 |
| Operating cost |
(158.5) |
(149.6) |
(172.1) |
(192.5) |
(197.9) |
(166.2) |
(158.7) |
(219.3) |
| EBITDA* |
201.0 |
216.0 |
209.6 |
202.3 |
162.2 |
222.1 |
246.2 |
145.7 |
| Other operating income |
0.2 |
0.2 |
0.2 |
0.2 |
0.2 |
0.2 |
0.2 |
0.5 |
| Impairment of long-term assets |
(15.0) |
|
|
|
(0.1) |
|
0.9 |
|
| Depreciation |
(27.2) |
(27.2) |
(38.8) |
(37.5) |
(37.7) |
(33.0) |
(31.4) |
(37.6) |
| MultiClient amortization |
(92.6) |
(80.7) |
(60.4) |
(68.2) |
(64.0) |
(78.5) |
(129.3) |
(72.8) |
| EBIT |
66.4 |
108.3 |
110.6 |
96.8 |
60.6 |
110.9 |
86.5 |
35.8 |
|
|
|
|
|
|
|
|
|
| CAPEX, whether paid or not |
(73.3) |
(93.2) |
(199.9) |
(71.4) |
(139.5) |
(76.6) |
(84.1) |
(67.9) |
| Cash investment in MultiClient |
(111.0) |
(120.9) |
(68.1) |
(72.9) |
(71.3) |
(91.4) |
(82.0) |
(52.7) |
| Order book |
669 |
579 |
446 |
592 |
829 |
608 |
689 |
655 |
**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 fourth quarter and preliminary full year 2013 results released on February 13, 2014.
Group Cost* Development
- Cost focus delivering results
- Flat cost development from Q4 2012 despite Ramform Titan in full operation
- Q4 2013 benefiting from a net steaming cost deferral compared to Q3
Cost impact of 2014 capacity growth balanced by the Profit Improvement Program
*Amounts show the sum of operating cost and capitalized MultiClient cash investment.
Consolidated Statements of Cash Flows Summary
|
Q4 |
Q4 |
Full year |
Full year |
| USD million |
2013 |
2012 |
2013 |
2012 |
| Cash provided by operating activities |
211.9 |
163.6 |
775.3 |
752.9 |
| Investment in MultiClient library |
(111.0) |
(71.3) |
(373.0) |
(297.4) |
| Capital expenditures |
(86.0) |
(131.5) |
(438.5) |
(358.5) |
| Other investing activities |
(23.0) |
(2.0) |
(49.2) |
(2.1) |
| Financing activities |
(27.1) |
141.2 |
(41.1) |
(129.3) |
| Net increase (decr.) in cash and cash equiv. |
(35.2) |
100.0 |
(126.5) |
(34.4) |
| Cash and cash equiv. at beginning of period |
299.0 |
290.3 |
390.3 |
424.7 |
| Cash and cash equiv. at end of period |
263.8 |
390.3 |
263.8 |
390.3 |
- The increase in cash provided by operating activities in Q4 and full year 2013 was driven primarily by higher EBITDA
- 2013 CAPEX ended lower than the guided USD 450 470 million with a corresponding increase in 2014 guidance
The accompanying unaudited financial information has been prepared under IFRS. This information should be read in conjunction with the unaudited fourth quarter and preliminary full year 2013 results released February 13, 2014.
Strong Balance Sheet Position - Key Figures
|
December 31 |
December 31 |
| USD million |
2013 |
2012 |
| Total assets |
3 544.3 |
3 275.6 |
| MultiClient Library |
576.9 |
382.3 |
| Shareholders' equity |
2 065.6 |
1 911.5 |
| Cash and cash equiv. |
263.8 |
390.3 |
| Restricted cash |
89.4 |
92.3 |
| Liquidity reserve |
763.8 |
740.3 |
| Gross interest bearing debt |
1 040.8 |
921.6 |
| Net interest bearing debt |
666.7 |
435.6 |
- The Board will propose an ordinary dividend for 2013 of NOK 2.30 per share, up 39% from previous year
- Net debt well below threshold of 1x EBITDA in a strong market and 2x EBITDA in a weak market
- Shareholders' equity at 58% of total assets
The accompanying unaudited financial information has been prepared under IFRS. This information should be read in conjunction with the unaudited fourth quarter and preliminary full year 2013 results released on February 13, 2014.
Operational Update and Market Comments
Unaudited Fourth Quarter and Preliminary Full year 2013 Results
Streamer Operations February 2014
Bidding Activity
Source: PGS internal estimate as of end January 2014. 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
- Growth in sq.km. flattened out from 2012 to 2013
- From 2006 to end 2013 demand for seismic grew by approximately 120% measured in sq.km.
- Annual average growth rate of 11%
- Expected streamer capacity
- 3% decrease in 2013
- 9% increase in 2014
- 4% increase in 2015
- No known capacity scheduled for 2016 and beyond
PGS' Strategic Ambition
• To Care
- For our employees
- For the environment and society at large
- For our customers' success
• To Deliver Productivity Leadership
- Ramform platform + GeoStreamer
- Reducing project turnaround time
• To Develop Superior Data Quality
- GeoStreamer business platform
- Imaging Innovations
- Subsurface knowledge
• To Innovate
- First dual sensor streamer solution
- First with 20+ towed streamer capability
- Unique reservoir focused solutions
• To Perform Over the Cycle
- Profitable with robust balance sheet
- Absolute focus on being best in our market segment
A Clearer Image
Good MultiClient Sales Performance from All Vintages
Market Outlook
- Sustainable high oil price
- Deep water attractive for E&Ps – Playing to PGS' strengths
- Customer focus on preserving dividend capacity
- Pricing for booked 2014 work is unchanged from average 2013 level, with the exception of recent Q1 bookings
- Healthy market conditions for Q2 and Q3 driven by North Atlantic summer season
EBITDA in the range of USD 900-950 million
MultiClient cash investments of approximately USD 350 million
• Pre-funding level of approximately 100%
Capital expenditures of approximately USD 450 million
- Adjusted to include a USD 25 million reduction from Q4 2013
- Approximately USD 275-300 million are related to the new-build program
2013 In Conclusion: A Well Positioned Focused Marine Seismic Company
- Increasing financial flexibility
- Continuously focusing on cost, quality and returns
- Proposed a dividend of NOK 2.30 per share
- Successful introduction of the new Ramform Titan–class vessels
- Breakthrough for new imaging technologies
Competitively Positioned – Performance Through the Cycle
Thank you – Questions?
Appendix: Continuously Ahead of Competition
- PGS builds vessels to optimize cost and efficiency over the vessels' useful life
- Growing capacity over the cycle rather than trying to time the market
- Larger vessels enable safer and more efficient high quality seismic
- Fleet optimization by decommission of two older vessels one in 2014 and one in 2015
Favorably Positioned on the Industry Cost Curve
PGS fleet is positioned to generate the industry's best margins
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. -31-
The PGS Fleet: Delivers Productivity Leadership
- Ramform fleet is improving further with 4 new Titanclass vessels
- GeoStreamer contributes to productivity leadership
- Industrialized approach to fleet renewal
Ramform productivity is a key differentiator
Main Yard Stays Next 6 Months
| Vessel |
When |
Expected
Duration |
Type of
Yard Stay |
Ramform
Sovereign |
March 2014 |
Approximately
10 days |
Upgrade to
GeoStreamers |
Ramform
Vanguard |
April 2014 |
Approximately
20 days |
Renewal class |
Ramform
Challenger |
April 2014 |
Approximately
8 days |
Intermediate class |
Ramform
Sterling |
June 2014 |
Approximately
25 days |
Renewal class |
Attractive Debt Structure
Long term Credit Lines and Interest
Bearing Debt |
Nominal
Amount at
December
31, 2013 |
Total
Credit Line |
Financial Covenants |
USD 470.5 million Term Loan ("TLB"), Libor +
175 basis points, due 2015 |
USD 470.5
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 |
Undrawn |
USD 500
million |
Maintenance covenant:
total leverage ratio
< 2.75:1 |
Japanese ECF, 12 year with semi-annual
installments. 50% fixed/ 50% floating interest
rate |
USD 125
million |
USD 250
million |
None |
| 2018 Senior Notes, coupon of 7.375% |
USD 450
million |
|
None, but incurrence
test:
Interest coverage ratio
> 2.0:1 |