SEB Nordic Seminar
January 9, 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 other financial statements and the disclosures therein
Leading Marine Geophysical Company
Marine Contract
Marine market leadership c. 50% of Revenues YTD 2013
Marine Contract acquires seismic data exclusively for oil and gas exploration and production companies
MultiClient
Diverse MultiClient library c. 40% of Revenues YTD 2013
MultiClient initiates and manages seismic data PGS acquires, markets and sells to multiple customers on a nonexclusive basis
Operations
Productivity leadership
Operations supports Marine Contract and MultiClient with vessel resources and manages fleet renewal strategies
Imaging & Engineering
Technology differentiation
c. 10% of Revenues YTD 2013
Imaging and Engineering processes seismic data acquired by PGS for its MultiClient library and for external clients on contract and manages research and development activities
Client focus ● Global presence ● Innovation leadership
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
PGS - A Clearer Image
Strategic Ambition: To Care
2013 Industry Leading HSEQ Statistics
Strategic Ambition: To Deliver Productivity Leadership
- 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
Strategic Ambition: To Develop Superior Data Quality
Strategic Ambition: To Innovate
GeoStreamer – The New Business and Technology Platform:
- Gives higher resolution, better depth imaging and improved operational efficiency
- Improves the seismic value chain from acquisition to processing
Strategic Ambition: To Perform Over the Cycle
- Well capitalized to handle macro turbulence and unforeseen market weakness
- Solid balance sheet supports long-term value creation
- Proven ability to generate healthy cash from operations through the cycle
- Ability to renew and build quality capacity industrially through the cycle
- Continuous cost and quality focus
Strategic Ambition: To Perform Over the Cycle - ROCE
Return on capital employed is calculated as EBIT less reported tax expense (excluding impairments and other operating income/expense) as a percentage of average net capital employed (sum of shareholder's equity and net interest bearing debt adjusted for deferred tax assets and net assets on discontinued operations). Adjustments have been made to exclude Onshore and Production which have been discontinued in the period. 2005 is N GAAP all other years are IFRS based.
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 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.
Investing in a Growth Case
Current streamer capacity New Build streamer capacity
- EPS growth in focus going forward
- Still good potential from current profitability
- 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
Order Book Transitioning Well Into 2014 Summer Season
The majority of larger jobs require GeoStreamer acquisition solutions
Bidding Activity
- Increase in Active Tenders
- Decline in all sales leads post awards for the 2014 North Atlantic season
- Strong increase in industry order book
- Survey size continues to favor the PGS Ramform fleet
The majority of large bids require GeoStreamer or similar technology
Source: PGS internal estimate as of end December 2013. 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.
Activity in Different Regions
Temporarily Slow Basins with Potential for Increased Activity
Good MultiClient Sales Performance from All Vintages
- Strong sales progress for all vintages
- Moderate net book values (NBV) for surveys completed 2008-2013
- Surveys in progress account for approx. 65% of NBV (by Q3 2013)
- Amortization is primarily based on the ratio of cost to forecasted sales
- 2014 amortization rate expected
Reflections for 2014
Market:
- Market softness will impact Q1
- Demand picture for North Atlantic summer season is good with firm indications of clients willing to pay more for quality products and right service offering
- Significant industry capacity absorbed on large contracts outside of the North Atlantic
- Continued increase in survey size
PGS:
- PGS is entering 2014 with a comfortable order book and good visibility
- PGS streamer capacity will on average be 12% higher in 2014 vs. 2013
- GeoStreamer® share of the fleet will be approximately 90% by end 2014
- Continued increase in GeoStreamer demand
- Pacific Explorer has been taken out from the 3D market
- Aim to capitalize on MultiClient investments made in 2013
- Less active 3D capacity allocated to MultiClient in 2014 compared to 2013
In Conclusion: A Well Positioned Focused Marine Seismic Company
- Improving productivity & scale
- Building four new Ramform Titan-class vessels, of which one is delivered
- Leading 3D MultiClient library returns
- GeoStreamer delivers improved data quality, strong performance and better pricing
- Leading edge imaging capabilities
- Technology differentiation with the GeoStreamer platform, Towed EM and OptoSeis
- Strong balance sheet
Thank you – Questions?
Appendix: 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, Sclass with 14 streamers and the V-class with 12 streamers.
The PGS Fleet To Deliver 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
- Ramform S-class records
- Monthly production record: 3,056 sq.km acquired (12 streamers x 8,100 meters with 120m separation)
- Weekly production record: 919 sq.km acquired
- Daily production record: 143.6 sq.km acquired
- BP Ceduna 3D S Australia: 12,030 sq.km in 186 days, 65 sq.km/day, remote and harsh environment
- Petrobras, Largest deployment ever: 14 streamers x 8,100 meters with 50 meter separation – regular operations for almost 4 years
- Ramform S and V-class 17 streamer tow with 50 meter separation
- Kwanza MC3D Angola, Ramform Valiant and PGS Apollo
- 25,500 sq.km in 470 days, 54 sq.km/day, remote and harsh environment
- No recovery of streamers during project
- No recordable safety incidents
Fleet Plan Supporting Industrial Growth Approach
|
|
2014 |
|
|
2015 |
|
|
|
2016 |
|
|
|
| Vessel |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sanco Spirit |
1 |
1 |
1 |
1 |
1 |
1 |
1 |
1 |
1 |
1 |
1 |
1 |
| Nordic Explorer |
1 |
1 |
1 |
1 |
1 |
1 |
1 |
1 |
|
|
|
|
| Pacific Explorer |
0 |
0 |
1 |
1 |
1 |
1 |
1 |
1 |
|
|
|
|
| Atlantic Explorer |
6 |
6 |
6 |
6 |
6 |
6 |
6 |
6 |
|
|
|
|
PGS
Apollo |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
Ramform
Explorer |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
Ramform
Challenger |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
Ramform
Valiant |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
Ramform
Vanguard |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
12 |
Ramform
Viking |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
Ramform
Sovereign |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
Ramform
Sterling |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
| Ramform Titan |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
| Ramform Atlas |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
| Ramform TTN 3 |
|
|
|
|
|
|
16 |
16 |
16 |
16 |
16 |
16 |
| Ramform TTN 4 |
|
|
|
|
|
|
|
16 |
16 |
16 |
16 |
16 |
- Planned retirement of old and low capacity vessels
- Fleet renewal and organic growth through high capacity newbuilds
- Low capacity vessels capable of supporting growth potential in EM/2D
(Numbers represent typical streamer count in 100M streamer separation mode)
GeoStreamer® Technology Rollout
• GeoStreamer operations
- Atlantic Explorer
- (6 streamers)
- Ramform Explorer
- (10 streamers)
- Ramform Challenger
- (10 / 12 streamers)
- Ramform Valiant
- (12 streamers)
- Ramform Viking
- (12 streamers)
- Ramform Vanguard
- (12 streamers)
- PGS Apollo
- (10 Streamers)
- Sanco Spirit (2D)
- Nordic Explorer (2D)
- Ramform Titan
- (16 streamers)
• Remaining rollout program
| – |
Ramform Atlas |
Q114 |
|
•
(16 streamers) |
|
| – |
Ramform Sovereign |
H114 |
|
•
(14 streamers) |
|
| – |
Ramform Titan 3 |
Q315 |
|
•
(16 streamers) |
|
| – |
Ramform Titan 4 |
Q415 |
|
•
(16 streamers) |
|
| – |
Ramform Sterling |
H116 latest |
|
•
(14 streamers) |
|
|
|
|
On schedule for 100% GeoStreamer® operation within next 2 years
Main Yard Stays Next 6 Months
| Vessel |
When |
Expected
Duration |
Type of Yard Stay |
|
|
Ramform
Sovereign |
April 2014 |
Approximately
10 days |
Upgrade to
GeoStreamers |
|
|
Ramform
Vanguard |
April/May 2014 |
Approximately
22 days |
Renewal class |
|
|
Ramform
Challenger |
March/April 2014 |
|
Intermediate class |
|
|
Growth Driven Cost Changes in 2014
- 2013 cash cost to end Roll forward of PGS cash cost indication *
- significantly lower than indicated a year back
- Lower project related costs and cost reductions
- 2014 cost increase driven by growth
- Modest inflationary cost increase expected
- Vessel capacity cost increase relates to full year operation of Ramform Titan and Ramform Atlas entering operation Q1 2014
- Lower yard activity reduces capitalized operating costs
Sufficient Sources to Finance Remaining New Build CAPEX
- PGS is seeking an opportunity to raise Japanese Export Credit Financing (ECF) for the two last vessels scheduled to be delivered in 2015
- Current cash resources, cash from operations and the Revolving Credit Facility will secure sufficient liquidity buffer and maintain a conservative balance sheet
Capital Expenditures – 2014 Trends and Projections
- Approx. USD 75 million CAPEX moved from 2013 to 2014 as Ramform Atlas will be delivered after year-end
- 2013 CAPEX to end at USD 450-475
- USD 75 million down from previous
- 2014 CAPEX expected to be approximately USD 400-450 million
- USD 275-300 million relates to new builds
- Approx. USD 65 million for GeoStreamer and related equipment (excl. new builds)
- Run rate for maintenance CAPEX (i.e. total CAPEX excluding investment in capacity increase) estimated to USD 150- 180 million annually
- Decision taken to make the stacked source vessel Polar Sea available for sale to avoid the rigging CAPEX
- Approx. USD 15 million write down likely in Q4 2013
Attractive Debt Structure
Long term Credit Lines and Interest
Bearing Debt |
Nominal
Amount at
September
30, 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 |