PGS ASA — Investor Presentation 2018

Oct 18, 2018

Third Quarter 2018 Results

Earnings Presentation

Cautionary Statement

• 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 second quarter and first half 2018 results and the disclosures therein
• Petroleum Geo-Services ASA and its subsidiaries ("PGS" or "the Company") has implemented the new revenue recognition standard, IFRS 15, as the Company's external financial reporting method. This change impacts the timing of revenue recognition for MultiClient pre-funding revenues and related amortization. PGS will for internal management purposes continue to use the revenue recognition principles applied in previous periods, which are based on percentage of completion, and use this for numbers disclosed as Segment Reporting. See Note 14 of the Q3 2018 earnings release for definitions of terms. See Note 16 of the Q3 2018 earnings release for a description of the change in revenue recognition resulting from the implementation of IFRS 15. PGS will not restate prior periods

Q3 Highlights: Investing in MultiClient Growth

• Segment Revenues of USD 192.1 million
• EBITDA of USD 132.8 million
• Expanding the MultiClient library:
• MultiClient cash investment of USD 101.9 million
• Will harvest from these investments in a strengthening market
• Leads for Q4 MultiClient late sales better than for many years
• Fundamentals improving:
• Strong oil price
• Improved cash flow amongst clients
• Highest value of bids and leads in more than 3.5 years
• 28% year-to-date increase of Segment MultiClient revenues

Financial Summary

Segment EBIT** Cash Flow from Operations

*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 2018 earnings release. **Excluding impairments and Other charges.

Order Book

• Order book of USD 144 million by end Q3 2018
• 3D vessel booking for next three quarters of 34 vessel months*
• Q4 18: 15 vessel months
• Q1 19: 14 vessel months
• Q2 19: 5 vessel months
• Large opportunity pipeline We have experienced delays in formalizing Q4 18 projects
• Slowness expected to be temporary
• Will operate six vessels in Q4
• Will incur idle time in Q4, due to late commencement of some projects

Financials

Unaudited Third Quarter 2018 Results

Consolidated Key Financial Figures

	Q 3	Q 3		Nine months Nine months	Full year
USD million (except per share data)	2018	2017	2018	2017	2017
Profit and loss numbers Segment Reporting*
Segment revenues	192.1	207.6	589.3	602.9		838.8
Segment EBITDA	132.8	108.6	361.2	251.3		374.1
Segment EBIT ex. Impairment and other charges, net	(2.7)	(30.4)	(11.8)	(122.6)	(147.1)
Profit and loss numbers As Reported under IFRS 15
Revenues	163.4	207.6	604.5	602.9		838.8
EBIT	(10.4)	(113.3)	12.9	(224.4)	(383.6)
Net financial items	(18.2)	(22.8)	(56.2)	(52.2)	(84.5)
Income (loss) before income tax expense	(28.7)	(136.1)	(43.3)	(276.6)	(468.2)
Income tax expense	(6.8)	(53.7)	(21.2)	(51.9)	(55.2)
Net income (loss) to equity holders	(35.4)	(189.9)	(64.5)	(328.6)	(523.4)
Basic earnings per share (\$ per share)	(\$0.10)	(\$0.56)	(\$0.19)	(\$0.97)	(\$1.55)
Other key numbers
Net cash provided by operating activities	133.3	118.4	328.6	197.8		281.8
Cash Investment in MultiClient library	(101.9)	(82.0)	(236.9)	(159.4)	(213.4)
Capital expenditures (whether paid or not)	(14.1)	(16.6)	(26.4)	(131.1)	(154.5)
Total assets	2,397.0	2,644.3	2,397.0	2,644.3	2,482.8
Cash and cash equivalents	44.4	24.2	44.4	24.2		47.3
Net interest bearing debt	1,149.0	1,113.2	1,149.0	1,113.2	1,139.4

* For definition of Segment Reporting numbers see Note 14 of the unaudited third quarter 2018 results, released on October 18, 2018.

The accompanying unaudited financial information has been prepared under IFRS. This information should be read in conjunction with the unaudited third quarter 2018 results, released on October 18, 2018.

Q3 2018 Operational Highlights

• Total Segment MultiClient revenues of USD 151.7 million
• Pre-funding revenues of USD 95.7 million
• Pre-funding level of 94% on USD 101.9 million of MultiClient cash investment
• Late sales revenues of USD 56.0 million
• Contract revenues of USD 34.3 million
• Low capacity allocation to contract

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

• Q3 2018 pre-funding revenues driven by North America, Europe and South America
• Late sales revenues dominated by Europe

Key Operational Segment Reporting Numbers

Key Operational Segment Reporting Numbers
		2018			2017
USD million	Q 3	Q 2	Q 1	Q 4	Q3	Q 2	Q1
Contract revenues	34.3	29.7	44.5	40.5	43.5	95.9	61.4
MultiClient Pre-funding	95.7	94.0	58.6	107.7	101.8	50.2	39.7
MultiClient Late sales	56.0	68.7	83.5	70.5	47.8	77.4	39.3
Imaging	6.1	6.7	6.7	9.8	12.5	14.9	13.8
Other	0.0	0.3	4.6	7.4	2.0	2.1	0.6
Total Revenues	192.1	199.4	197.8	235.9	207.6	240.5	154.8
Operating cost	(59.3)	(63.4)	(105.5)	(113.1)	(99.0)	(127.9)	(124.7)
EBITDA*	132.8	136.0	92.3	122.8	108.6	112.5	30.1
MultiClient amortization	(112.3)	(104.6)	(76.3)	(121.6)	(153.6)	(80.5)	(70.6)
Depreciation and amortization of long-term assets (excl. MC library)	(23.3)	(17.8)	(38.7)	(39.9)	(27.1)	(42.9)	(44.5)
Impairment and loss on sale of long-term assets (excl. MC library)	0.0	0.0	0.0	(55.8)	(28.5)	(9.9)	0.0
EBIT	(2.7)	13.6	(22.7)	(94.5)	(100.6)	(20.8)	(85.0)
CAPEX, whether paid or not	(14.1)	(8.3)	(4.0)	(23.4)	(16.6)	(12.9)	(101.6)
Cash investment in MultiClient	(101.9)	(81.3)	(53.7)	(54.0)	(82.0)	(43.8)	(33.6)
Order book	144	187	211	135	167	248	340

* 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 2018 earnings release. This information should be read in conjunction with the unaudited third quarter 2018 results released on October 18, 2018.

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

• 87% active vessel time in Q3 2018

• Will incur some idle time in Q4
• Approximately 60% of active 3D vessel time planned for contract work in Q4

Group Cost* Focus Delivers Results

• Graph shows gross cash costs excluding the effect of steaming deferral
• A better measure of actual quarterly cost
• Q3 18 gross cash cost 15% lower than in Q3 17
• Q4 18 gross cash costs expected to be lower due to less vessel capacity in operation
• Full year gross cost estimate based on six vessels in Q4

Full year 2018 gross cash costs expected to be approximately USD 600 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." -12-

Consolidated Statements of Cash Flows Summary

	Q3	Q3	Nine Months	Nine Months	Full year
USD million	2018	2017	2018	2017	2017
Cash provided by operating activities	133.3	118.4	328.6	197.8	281.8
Investment in MultiClient library	(101.9)	(82.0)	(236.9)	(159.4)	(213.4)
Capital expenditures	(14.9)	(9.3)	(35.9)	(134.0)	(148.8)
Other investing activities	(5.5)	(8.7)	(20.0)	9.1	62.1
Net cash flow before financing activities	11.0	18.4	35.8	(86.5)	(18.3)
Financing activities	9.0	(47.6)	(38.7)	48.9	3.8
Net increase (decr.) in cash and cash equiv.	20.1	(29.1)	(2.9)	(37.5)	(14.4)
Cash and cash equiv. at beginning of period	24.4	53.3	47.3	61.7	61.7
Cash and cash equiv. at end of period	44.4	24.2	44.4	24.2	47.3

• Cash flow from operating activities of USD 133.3 million in Q3 2018
• Improvement from Q3 2017 driven by higher earnings as a result of more MultiClient activity
• Impacted by USD 6.4 million payment of severance and other restructuring provisions made in Q4 2017 (USD 33.2 million year-to-date)
• Planning for positive cash flow after debt service in 2018¹

¹The financial target of being cash flow positive after debt service excludes payments relating to severance and other restructuring provisions made in Q4 2017 as well as drawings/repayments on the RCF.

The accompanying unaudited financial information has been prepared under IFRS. This information should be read in conjunction with the unaudited third quarter 2018 results released October 18, 2018.

Balance Sheet Key Numbers

	September 30	September 30	Opening balance	December 31
USD million	2018	2017	01.01.2018	2017
Total assets	2,397.2	2,644.3	2,567.6	2,482.8
MultiClient Library	709.3	566.1	668.0	512.3
Shareholders' equity	749.7	1,077.1	804.2	879.5
Cash and cash equivalents (unrestricted)	44.4	24.2	47.3	47.3
Restricted cash	42.4	114.7	43.3	43.3
Liquidity reserve	159.5	224.2	257.3	257.3
Gross interest bearing debt	1,235.9	1,252.1	1,229.5	1,229.5
Net interest bearing debt	1,149.0	1,113.5	1,139.4	1,139.4

• Liquidity reserve of USD 159.5 million

• In September the RCF was reduced from USD 400 million to USD 350 million in accordance with the extension and amendment of the facility agreed in November 2016
• Balance sheet restated January 1, 2018 due to IFRS 15
• Carrying value of MultiClient surveys in progress increased by USD 155.7 million
• Accrued revenues and other receivables decreased by USD 70.9 million, and deferred revenues increased by USD 160.1 million
• Shareholders' equity decreased by USD 75.3 million

Good Headroom to Maintenance Covenant

• Substantial reduction of Total Leverage Ratio ("TLR") during 2017 and year-to-date 2018
• Significant headroom to required level
• TLR of 2.75 as of September 30, 2018, compared to 4.34:1 as of September 30, 2017
• Expect to be in compliance going forward

Summary of Debt and Drawing Facilities

Long-term Credit Lines and Interest Bearing Debt	Nominal Amount	Total Credit Line	Financial Covenants
USD 400.0m TLB, due 2021 Libor (minimum 0.75%) + 250 bps	USD 382.0m		None, but incurrence test: total leverage ratio ≤ 3.00x*
Revolving credit facility ("RCF"), due 2020 Libor + margin of 325-625 bps (linked to TLR) + utilization fee	USD 235.0m	USD 350.0m	Maintenance covenant: total leverage ratio 4.25x Q1-18, thereafter reduced by 0.25x each quarter to 2.75x by Q3-19
Japanese ECF, 12 year with semi-annual instalments. 50% fixed/ 50% floating interest rate	USD 380.9m		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*
December 2018 Senior Notes, coupon of 7.375% *Carve out for drawings under ECF and RCF	USD 26.0m		None

Debt and facilities as of September 30, 2018: Debt maturity profile:

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Operational Update and Market Comments

Unaudited Third Quarter 2018 Results

Streamer Operations October 2018

Marine Seismic Market Outlook

• Higher oil price, improved cash flow among oil companies and an exceptionally low oil and gas discovery rate are benefitting marine 3D seismic market fundamentals
• Value of bids and leads for contract work at highest level for more than 3.5 years
• Clear signs of improvement for marine contract
• Achieved higher prices and margins year-to-date, compared to same period last year
• Solid increase in MultiClient sales compared to last year
• Leads for Q4 MultiClient late sales better than for many years

Seismic Market Activity

• Value of Sales Leads and Active Tenders continues to rise
• Recent increase driven by West Africa and South America

• Increasing number of bids for 2019 Europe season

• Volume of acquired marine 3D seismic is expected to be higher in 2018 vs. 2017

• Somewhat weaker expected vessel utilization in Q4 reduces the estimated overall 2018 volume

• Group gross cash costs of ~USD 600 million

• Of which ~USD 285 million to be capitalized as MultiClient cash investments

• MultiClient cash investments ~USD 285 million

• ~65% of 2018 active 3D vessel time allocated to MultiClient

• Capital expenditure of ~USD 40 million

Q3 in Conclusion: Expanding the MultiClient Data Library

• Invested more than USD 100 million in attractive MultiClient projects and continued to expand on the MultiClient data library
• Achieved higher prices and margins for contract work year-to-date compared to same period last year
• Weak order book development during the quarter
• PGS market view unchanged owing to improving fundamentals
• Tight overall cost control remains a priority

Thank You – Questions?

COPYRIGHT

The presentation, including all text, data, photographs, drawings and images (the "Content") belongs to Petroleum Geo-Services ASA, and/or its subsidiaries ("PGS") and may be protected by Norwegian, U.S., and international copyright, trademark, intellectual property and other laws. Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior written permission by PGS and applicable acknowledgements. In the event of authorized reproduction, no trademark, copyright or other notice shall be altered or removed. © 2015 Petroleum Geo-Services ASA. All Rights Reserved.

Appendix Main Yard Stays* Next Six Months

Vessel	When	Expected Duration	Type of Yard Stay
Ramform Atlas	Q4 2018	7 days	Main class and technical yard
Apollo	Q4 2018	12 days	Major engine overhaul
Ramform Sterling	Q1 2019	22 days	Main class and technical yard

*Yard stays are subject to changes.

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