PGS ASA — Earnings Release 2019

Oct 17, 2019

Third Quarter 2019 Earnings Presentation

October 17, 2019

• 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 third quarter 2019 results and the disclosures therein

Q3 2019 Highlights: Strong Earnings Improvement in a Recovering Market

• Highest EBITDA since Q4 2014
• Contract revenues of USD 76.3 million
• 2019 price increase of close to 40% vs. 2018
• Solid vessel production
• MultiClient revenues of USD 148.8 million
• High sales from surveys in processing phase drives prefunding level to 125%
• Order book more than doubled from Q3 2018
• Eight 3D vessels in operation during winter season

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 14 of the Q3 2019 earnings release. **Excluding impairments and Other charges.

Order Book More Than Doubled From Q3 2018

Financials

Unaudited Third Quarter 2019 Results

Consolidated Key Financial Figures

	Q3	Q3	YTD	YTD	Full year
USD million (except per share data)	2019	2018	2019	2018	2018
Profit and loss numbers Segment Reporting
Segment revenues	234.2	192.1	591.7	589.3	834.5
Segment EBITDA	160.2	132.8	361.9	361.3	515.9
Segment EBIT ex. Impairment and other charges, net	38.0	(2.7)	26.2	(11.7)	36.3
Profit and loss numbers As Reported		5
Revenues	276.5	163.4	598.2	604.5	874.3
EBIT	50.3	(10.4)	0.4	13.0	39.4
Net financial items	(12.9)	(18.2)	(66.7)	(56.2)	(87.3)
Income (loss) before income tax expense	37.4	(28.6)	(66.3)	(43.3)	(47.9)
Income tax expense	(5.9)	(6.8)	(16.3)	(21.2)	(40.0)
Net income (loss) to equity holders	31.5	(35.4)	(82.6)	(64.4)	(87.9)
Basic earnings per share (\$ per share)	\$0.09	(\$0.10)	(\$0.24)	(\$0.19)	(\$0.26)
Other key numbers
Net cash provided by operating activities	151.9	133.3	379.5	328.6	445.9
Cash Investment in MultiClient library	75.7	101.9	203.5	236.9	277.1
Capital expenditures (whether paid or not)	10.2	14.1	40.9	26.4	42.5
Total assets	2,262.4	2,397.2	2,262.4	2,397.2	2,384.8
Cash and cash equivalents	36.0	44.4	36.0	44.4	74.5
Net interest bearing debt	1,015.9	1,149.0	1,015.9	1,149.0	1,109.6
Net interest bearing debt, including lease liabilities following IFRS 16*	1,220.3		1,220.3

*Following implementation of IFRS 16, prior periods are not comparable to September 2019.

The accompanying unaudited financial information has been prepared under IFRS. This information should be read in conjunction with the unaudited third quarter 2019 results, released on October 17, 2019.

Q3 2019 Operational Highlights

• Total Segment MultiClient revenues of USD 148.8 million
• Pre-funding level of 125% on USD 75.7 million of MultiClient cash investment
• Late sales of USD 53.9 million
• Contract revenues of USD 76.3 million

Pre-funding and Late Sales Revenues Combined: Segment MultiClient Revenues per Region

Europe Africa Middle East N. America S. America Asia Pacific

Seismic Streamer 3D Fleet Activity in Streamer Months: Vessel Allocation* and Utilization

• 88% active vessel time in Q3 2019 – No stacked/standby time
• High vessel utilization expected in Q4 – Overweight of capacity towards contract
• Improving annual vessel utilization

Group Cost* Focus Delivers Results

• Graph shows gross cash costs excluding the effect of steaming deferral
• Q3 2019 gross cash costs impacted by
• Higher project specific cost for some surveys
• Eight active 3D vessels during winter and higher geographical project specific costs increase full year cost level

Full year 2019 gross cash costs of ~USD 575 million

*Gross cash costs are defined as the sum of reported net operating expenses (excluding depreciation, amortization, impairments, deferred steaming 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." -11-

Consolidated Statements of Cash Flows Summary

	Q3	Q3	YTD September 30	YTD September 30	Full year
USD million	2019	2018	2019	2018	2018
Cash provided by operating activities	151.9	133.3	379.5	328.6	445.9
Investment in MultiClient library	(75.7)	(101.9)	(203.5)	(236.9)	(277.1)
Capital expenditures	(22.2)	(14.9)	(50.4)	(35.9)	(48.0)
Other investing activities	(4.4)	(5.5)	57.4	(20.0)	(25.0)
Net cash flow before financing activities	49.6	11.0	183.0	35.8	95.8
Interest paid on interest bearing debt	(14.0)	(12.1)	(42.9)	(44.0)	(63.4)
Repayment of interest bearing debt	(12.9)	(13.9)	(38.5)	(39.7)	(80.2)
Payment of lease liabilities	(14.9)	-	(45.1)	-
Net change drawing on RCF	(5.0)	35.0	(95.0)	45.0	75.0
Net increase (decr.) in cash and cash equiv.	2.8	20.0	(38.5)	(2.9)	27.2
Cash and cash equiv. at beginning of period	33.2	24.4	74.5	47.3	47.3
Cash and cash equiv. at end of period	36.0	44.4	36.0	44.4	74.5

• Strong cash provided by operating activities driven by higher earnings
• YTD cash flow before financing activities of USD 183.0 million
• RCF drawings reduced by USD 95 million

Balance Sheet Key Numbers

	September 30	September 30	December 31
USD million	2019	2018	2018
Total assets	2,262.4	2,397.2	2,384.8
MultiClient Library	652.3	709.3	654.6
Shareholders' equity	615.9	749.7	721.8
Cash and cash equivalents (unrestricted)	36.0	44.4	74.5
Restricted cash	41.8	42.4	43.2
Liquidity reserve	216.0	159.5	159.5
Gross interest bearing debt*	1,093.7	1,235.9	1,227.3
Gross interest bearing debt, including lease liabilities following IFRS 16*	1,298.1
Net interest bearing debt*	1,015.9	1,149.0	1,109.6
Net interest bearing debt, including lease liabilities following IFRS 16*	1,220.3

• Gross interest bearing debt (ex. lease liabilities) of USD 1,093.7 million
• Down USD 133.6 million YTD
• Net interest bearing debt (ex. lease liabilities) of USD 1,015.9 million
• Down USD 93.7 million YTD
• Liquidity reserve of USD 216.0 million
• Up USD 56.5 million YTD
• Total Leverage Ratio (as defined in credit agreement) of 2.55:1

LTM Free Cash Flow Generation

Free cash flow will improve further in a recovering seismic market

Summary of Debt and Drawing Facilities

As of September 30, 2019:

Long-term Credit Lines and Interest Bearing Debt	Nominal Amount	Total Credit Line	Financial Covenants
USD 400.0m TLB, due March 2021 Libor (minimum 0.75%) + 250 bps	USD 378.0m		None, but incurrence test: total leverage ratio ≤ 3.00x*
Revolving credit facility ("RCF"), due September 2020 Libor + margin of 325-625 bps (linked to TLR) + utilization fee	USD 170.0m	USD 350.0m	Maintenance covenant: total leverage ratio ≤ 2.75x*
Japanese ECF, 12 year with semi-annual instalments. 50% fixed/ 50% floating interest rate	USD 333.7m		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*

Refinancing – Market Backdrop

• Challenging for oil service companies to refinance in the high yield ("HY") market
• HY Oilfield Services Index dominated by drilling and other offshore services
• Seismic sector outperforming most other offshore oil service sectors
• Positive cash flow and earnings
• Significant supply side consolidation
• Reflected in trading of debt, but currently not necessarily in new issuances

Refinancing

• Plan to refinance during Q4 2019 or early 2020 without equity
• Positioned to execute on short notice
• Timing and structure dependent on market conditions
• PGS generates solid cash flow
• Lower leverage and less capital needed if refinancing is done early 2020
• Evaluating options to address 2020 and 2021 maturities

Operational Update and Market Comments

Unaudited Third Quarter 2019 Results

Streamer Operations October 2019

Seismic Contract Market Outlook

Close to 40% higher prices on 2019 contract work vs. average 2018

• Bidding activity on a positive trend
• Higher contract activity and good overall fleet utilization this winter season compared to last
• Emerging supply constrains even over winter season
• PGS booking for winter season significantly ahead of last year

Significant Supply Reduction

• 2019 average capacity close to 50% lower than average capacity in 2013
• 2020 capacity increase vs. 2019 due to less winter warm-stacking

Last Twelve Months Performance: Improving Market Fundamentals Reflected in Financials

*Excluding impairments and Other charges.

Group gross cash cost of ~USD 575* million, excluding deferred steaming

• MultiClient cash investments ~USD 250* million
• Approximately 50% of 2019 active 3D vessel time allocated to MultiClient

Capital expenditures of ~USD 60 million

Summary

• Highest EBITDA since Q4 2014
• Total MultiClient revenues in line with internal expectations
• Higher than normal share of sales from surveys in the processing phase
• Full year 2019 pre-funding level in high-end of targeted 80-120% interval
• Contract revenues benefit from increased demand; strong price increase and high utilization
• More than a doubling of order book
• Seismic streamer market continues to improve
• Focus on refinancing

Thank You – Questions?

Appendix Main Yard Stays* Next Six Months

Vessel	When	Expected Duration	Type of Yard Stay
Apollo	Q4 2019	22 days	Main class
Ramform Hyperion	Q1 2020	15 days	Scrubber installation

*Yard stays are subject to changes.

27

28

29