Barclays CEO Energy-Power Conference Jon Erik Reinhardsen, President & CEO New York September 8, 2016
- 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
Marine Contract
Marine market leadership 28%* of revenues in 2015
Marine Contract delivers exclusive seismic surveys to oil and gas exploration and production companies
MultiClient
Diverse MultiClient library 60%* of revenues in 2015
MultiClient initiates and manages seismic surveys which PGS acquires, processes, markets and sells to multiple customers on a non-exclusive basis
Operations
Productivity leadership
Operations supports Marine Contract and MultiClient with vessel resources and manages fleet renewal strategies
Imaging & Engineering
Technology differentiation
10%* of revenues in 2015
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
*Remaining 2% relates to Other revenues.
Early Signs of an Improved Market Sentiment
- Gradual oil price recovery
- Increasing interest for MultiClient data library
- Quarterly and regional near-term variability is expected
- Contract market still characterized by low pricing
- More predictable customer survey planning and contracting process
- Indications of some pent-up client demand
- High vessel utilization
- Low industry vessel idle time in Q1- Q3 2016
Marine Seismic Market Volume and Supply
- Industry expected to acquire 320- 340,000 sq.km of seismic in 2016
- An increase compared to previous estimate
- Volume of seismic acquired will be higher in 2016 compared to pre 2010
- Streamer capacity is approximately 45% lower than at the 2013 peak
PGS response – Focus on sales, operations, cost and cash flow discipline
Market Activity
- Seismic demand primarily driven by:
- Positioning for strategically important license rounds
- Seismic commitments in E&P licenses
- Production seismic
- Some opportunistic spending
- Decent volume of leads in Africa for Q1
- Soft in Asia Pacific, North and South America
- Shorter time and higher conversion rate from lead to tender
Source: PGS internal estimate as of end August 2016. 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.
Order Book
Financial Summary
*EBITDA, when used by the Company, means EBIT excluding other charges/(income), impairment and loss/gain on sale of long-term assets and depreciation and amortization. **Excluding impairment and loss on sale of long-term assets and other charges/(income
Consolidated Statements of Cash Flows Summary
|
Q2 |
Q2 |
1H |
1H |
| USD million |
2016 |
2015 |
2016 |
2015 |
| Cash provided by operating activities |
42.4 |
83.1 |
175.8 |
295.4 |
| Investment in MultiClient library |
(41.8) |
(73.6) |
(90.1) |
(137.6) |
| Capital expenditures |
(67.0) |
(72.2) |
(181.4) |
(102.9) |
| Other investing activities |
(2.9) |
59.2 |
(100.2) |
57.5 |
| Net cash flow before financing activities |
(69.3) |
(3.5) |
(195.9) |
112.4 |
| Financing activities |
2.4 |
(87.8) |
164.0 |
(109.5) |
| Net increase (decr.) in cash and cash equiv. |
(66.9) |
(91.3) |
(31.9) |
2.9 |
| Cash and cash equiv. at beginning of period |
116.6 |
148.9 |
81.6 |
54.7 |
| Cash and cash equiv. at end of period |
49.7 |
57.6 |
49.7 |
57.6 |
- Cash provided by operating activities of USD 42.4 million in Q2 2016
- Impacted by a slight reversal of the strong working capital improvement seen in Q1 due to a portion of MultiClient sales concluded late in the quarter
- Relatively high Q2 capex primarily due to yard installment at floating of Ramform Hyperion
- New build capex to be USD 115 million lower in 2H vs. 1H
Improving Cash Flow in 2H 2016
- Of the total USD 165 million full year new build capex, USD 140 million has already been incurred
- More balanced cash flow in 2H 2016
- Remaining capex through delivery of Ramform Hyperion substantially covered by the approximately USD 91 million of remaining Export Credit Financing
|
June 30 |
June 30 |
December 31 |
| USD million |
2016 |
2015 |
2015 |
| Total assets |
2 970.3 |
3 297.4 |
2 914.1 |
| MultiClient Library |
686.1 |
749.9 |
695.0 |
| Shareholders' equity |
1 350.3 |
1 799.9 |
1 463.7 |
| Cash and cash equivalents (unrestricted) |
49.7 |
57.6 |
81.6 |
| Restricted cash |
95.0 |
82.9 |
71.6 |
| Liquidity reserve |
429.7 |
545.7 |
556.6 |
| Gross interest bearing debt |
1 352.3 |
1 146.6 |
1 147.2 |
| Net interest bearing debt |
1 207.6 |
995.0 |
994.2 |
- Adequate liquidity reserve of USD 429.7 million
- Total leverage ratio of 3.86:1 as of June 30, 2016
- Leverage ratio maintenance covenant of the Revolving Credit Facility amended to a maximum of 5.50:1 from Q2 2016 through Q1 2017
- 1H increase in net interest bearing debt primarily due to new build capex
- Shareholders' equity at 45% of total assets
PGS Debt Structure
Long term Credit Lines and Interest
Bearing Debt |
Nominal
Amount as
of June 30,
2016 |
Total
Credit Line |
Financial Covenants |
USD 400.0 million Term Loan ("TLB"), Libor
(minimum 0.75%) + 250 basis points, due 2021 |
USD 391.0
million |
|
None, but incurrence test:
total leverage ratio
≤
3.00x* |
Revolving credit facility ("RCF"), due 2018
40% of applicable margin in commitment fee on
undrawn amount
Libor + margin of 200-325 bps + utilization fee |
USD 120.0
million |
USD 500.0
million |
Maintenance covenant:
total leverage ratio
≤
5.50x, to Q1-2017,
5.00x Q2-17, 4.5x Q3-17,
3.25x Q4-17, thereafter
reduced by 0.25x each
quarter to 2.75x by Q2-18 |
Japanese ECF, 12 year with semi-annual
installments. 50% fixed/ 50% floating interest
rate |
USD 391.3
million |
USD 482.5
million |
None, but incurrence test
for loan 3&4:
Total leverage ratio ≤
3.00x
and
Interest coverage ratio ≥
2.0x |
December 2018 Senior Notes, coupon of
7.375% and callable from 2015 |
USD 450.0
million |
|
None, but incurrence test:
Interest coverage ratio
≥ 2.0x* |
Proactive Cost Reductions Continue in 2016
- 2015 cash cost reductions amounted to approximately USD 280 million, including restructuring cost (approximately USD 320 million if restructuring cost is excluded)
- Further significant cost reductions expected to bring 2016 gross cash cost down to USD 700 million or below
- Tight cost control continues
- Initiatives implemented in 2015 to take full effect in 2016
- Delivery of Ramform Tethys adds to the cost base
- Cost discipline has high priority in 2016 with potential for further cost reductions -13-
MultiClient Vintage Distribution
- MultiClient library book value of USD 686.1 million as of June 30, 2016
- Moderate net book value for surveys completed 2011-2015
- Q2 2016 amortization rate of 67%
- 2016 amortization expense estimated to approximately USD 300 million
PGS Fleet Strategy: Building the Youngest and Most Productive Fleet in the Industry
High-end Ramforms - Flexible Capacity
Ramform Vanguard - in operation Ramform Valiant - cold stacked Ramform Viking - cold stacked Ramform Challenger - cold stacked Ramform Explorer - cold stacked *With possibility to buy back after year 5 and 8
- Combination of chartered high capacity conventional 3D vessels and temporarily coldstacked first generation Ramform vessels:
- Improves fleet flexibility
- Chartered capacity with staggered expiry structure
- Gives a competitive edge in the current market
- Positions PGS well to take advantage of a market recovery
Significantly reduced capex requirement going forward
The PGS Fleet
The Ultra High-end Ramforms
Ramform Titan Ramform Atlas Ramform Tethys Ramform Hyperion Scheduled delivery Q1 2017
Ramform Sterling Ramform Sovereign
High-end Conventional on Charter
PGS Apollo
Sanco Swift
Sanco Sword - rigging postponed until 2017 Sanco Spirit
2D/EM/Source
Atlantic Explorer
High-end Ramforms – Flexible Capacity
Ramform Explorer (cold stacked Q3 2015)
Ramform Challenger (cold stacked Q4 2015)
Ramform Valiant (cold stacked Q4 2015)
Ramform Viking (cold stacked Q4 2015)
Ramform Vanguard - in operation, but with possible periods of warm-stacking over the winter season
All vessels equipped with GeoStreamer, 3.5 years average vessel age of active vessels
In Conclusion: Competitively Positioned to Navigate Current Market Environment
- Early signs of improved market sentiment
- Industry leading fleet and technology position
- Healthy MultiClient performance
- Substantial cost reductions continue
- Improving cash flow in 2H 2016
- Financial covenant amended to create increased flexibility
Focus on sales, operations, cost and cash flow discipline
Thank you – Questions?