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TGS ASA Earnings Release 2014

Oct 23, 2014

3774_rns_2014-10-23_3ca5f768-b124-4002-9eae-d18fc1e83483.pdf

Earnings Release

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TGS Q3 2014 Earnings Release

Robert Hobbs Kristian K. JohansenChief Executive Officer Chief Financial Officer

All statements in this presentation other than statements of historical fact, are forward-looking statements, which are subject to a number of risks, uncertainties, and assumptions that are difficult to predict and are based upon assumptions as to future events that may not prove accurate. These factors include TGS' reliance on a cyclical industry and principal customers, TGS' ability to continue to expand markets for licensing of data, and TGS' ability to acquire and process data products at costs commensurate with profitability. Actual results may differ materially from those expected or projected in the forward-looking statements. TGS undertakes no responsibility or obligation to update or alter forward-looking statements for any reason.

  • Net revenues were 190 MUSD compared to 191 MUSD in Q3 2013
  • Net late sales of 130 MUSD, down 6% from 138 MUSD in Q3 2013
  • Net pre-funding revenues of 51 MUSD were up 17%, funding 55% of TGS' operational multi-client investments for the quarter (93 MUSD)
  • Operating profit for the quarter was 71 MUSD, 38% of net revenues, compared to 80 MUSD (42% of net revenues) in Q3 2013
  • Cash flow from operations was 184 MUSD compared to 118 MUSD in Q3 2013
  • Three 3D vessels and two 2D vessels operating under TGS control in Q3 2014
  • TGS was also a participant in two 2D marine JV projects, one high resolution P-CableTM marine JV project and one CSEM marine project
  • TGS commenced its first commercial Full Azimuth Node (FANTM) multi-client survey in the Gulf of Mexico

Operational Highlights

Q3 2014 Operations

Q3 Activity – North America

Central Gulf of Mexico

  • Snipe Phase 52 – 12,000 km multi-client 2D survey
  • Long offset, high resolution data in ultra deep water, extending to the U.S. – Mexico boundary
  • Supplements TGS' existing library in the region and provides critical well ties to a number of recent discoveries

East Canada

  • Newfoundland Labrador 2014 30,000 km multiclient 2D survey in partnership with PGS
  • Continuation of a multi-year program targeting Sectors announced for Newfoundland Labrador's new Scheduled Land Tender system
  • Complements TGS' existing 47,500 km of 2D in this region
  • Data being acquired utilizing PGS' Geostreamer® technology with data processing performed by TGS
  • Seafloor sampling samples collected in partnership with PGS and VBPR to improve understanding of stratigraphy and source rock potential in this frontier play

Q3 Activity – Norway

Barents Sea

  • Significant TGS activity in Barents Sea targeting 23rd Round (including Hoop Basin and SE Barents) with multiple data products
  • NBR14 2D 9,300 km multi-client extension of TGS long offset 2D grid into eastern Barents Sea including the newly opened area in the former disputed Norway-Russia zone
  • Clari-Fi™ 2D multi-client broadband reprocessing of >18,000 km data owned by the Norwegian Petroleum Directorate
  • HFCE14 3D – 3,100 km2 multi-client survey extending TGS' existing 3D Hoop Basin coverage to >20,000 km2
  • P-CableTM approx. 500 km2 multi-client high resolution survey in partnership with WGP
  • CSEM – electromagnetic multi-client data being acquired over 18 blocks in partnership with EMGS

Q3 Activity – Other Areas

West of Shetland

  • Brendan Basin 2,500 km2 multi-client 3D survey
  • Erlend Basin - 1,700 km2 multi-client 3D survey
  • Data being processed utilizing TGS' proprietary Clari-Fi™ broadband technology
  • Extends TGS library in this highly prospective region to 19,200 km2 of modern 3D data

Greenland

  • NE Greenland 2014 5000 km multi-client 2D survey, part of a 13,000 km multi-year program
  • Data being processed utilizing TGS' proprietary Clari-Fi™ broadband technology
  • Upon completion of the program TGS' 2D multi-client library in the region will total more than 36,000 km

Sierra Leone

  • Sierra Leone Block 4A Extension – 1,200 km2 multiclient 3D survey
  • Extends TGS library in this region to approximately 7,500 km2 of modern 3D data

Enhancing Value through Technology

Full Azimuth Ocean Bottom Nodes

  • Multi-year collaboration agreement with FairfieldNodal to execute multi-client Full Azimuth Nodal (FANTM) seismic surveys across a substantial area within the U.S. Gulf of Mexico shelf region
  • Nessie FANTM - 54 block multi-client FANTM survey in the South Timbalier protraction area covering a number of existing fields and exploratory acreage
  • FANTM data will provide significant uplift in illumination of existing Miocene reservoirs and emerging inboard Cretaceous and Lower Tertiary opportunities
  • Acquisition commenced in Q3 and will complete in Q4 2014
  • Calypso FANTM - 136 block multi-client FANTM survey in the Eugene Island protraction area
  • Survey already partially acquired and operations are scheduled to restart end November 2014 continuing through the full year 2015

FANTM Technology Benefits

  • Longer offsets
  • Full and all-azimuth data
  • Unlimited record lengths
  • Continuous recording
  • Direct coupling with earth and superior vector fidelity
  • Deployment in congested areas and obstructed waters

Financials

Key Financials

EBIT before non-recurring items

Multi-client NBV and Investments (operational)

Cash Flow from Operations

Net Revenue Breakdown

Europe 35%

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The Company holds no interest-bearing debt

Investments per Vintage

Net Revenues vs. Net Book Value per Vintage

Net revenuesNet book value

Continued Growth in Returning Cash to Shareholders

  • Dividend of NOK 8.5 per share for the 2013 accounting year
  • Shares were quoted ex dividend on 4 June 2014
  • Dividend was paid out on 18 June 2014
  • In addition, the Board has authorized a share buy back program of USD 30 million of which USD 15.7 million has been implemented at end of Q3
  • Dividend and share buy back program represent approximately USD 175 million in cash returns to shareholders
  • NOK 10.3 per share

Dividend per share (NOK) and Dividend Yield

Dividend yield calculated based on share price at day of announcement

Strong commitment on delivering shareholder returns from a combination of growth and dividend payout

Outlook

Outlook

  • Macro Outlook
  • Near-term uncertainty in exploration spending has been increased by negative oil price development
  • Likely that energy companies will continue their efforts to reduce capital expenditures and become more selective when prioritizing investments
  • EUR
  • Awaiting official announcement of the Norwegian 23rd Licensing Round
  • 2014 season of Greenland 13,000 km multi-year program to complete in Q4
  • NSA
  • BOEM has commenced process to develop next five year leasing program in U.S (2017-2022)
  • TGS expanding library in core Central GOM region with Nessie FANTM, Calypso FANTM, Declaration multi-WAZ, Panfilo 3D and Snipe Phase 52 2D programs
  • Sectors announced for Newfoundland Labrador's new Scheduled Land Tender system
  • Vessels secured for entry into Mexico (subject to permit)
  • Five onshore projects scheduled for recording during Q4 and 2015 (including Utica, SCOOP and Duvernay plays)
  • AMEAP
  • 13,000 km2 Nerites Season 2 expected to commence Q4 2014
  • 17,000 km 2D multi-client survey planned in Northwest New Zealand
  • Awaiting further Africa license round announcements

License Round Activity and TGS Positioning

North & South America

  • •Central GOM – Mar 2015 (5-Year Plan)
  • •Western GOM – Aug 2015 (5-Year Plan)
  • •Alaska Offshore - 2016 & 2017 (5-Year Plan)
  • •Newfoundland & Labrador – Scheduled Land Tenure system
  • •Nova Scotia – Oct 2014 (bids due)
  • •Canada Onshore – at least monthly
  • •Brazil - mid-2015 (expected)
  • •Mexico – 2015 (Round 1 phased across 2015)

Africa, Middle East, Asia Pacific

  • •Madagascar – 2014 / 2015 (expected)
  • •Sierra Leone – 2015 (expected)
  • • Liberia – Nov 2014 (bids due), Harper Basin 2015 (expected)
  • • Australia – Oct 2014 , Feb 2015 & Apr 2015 (bids due)
  • •Indonesia – Jul & Oct 2014 (bids due)

Europe / Russia

  • • Norway APA – awards 1H 2015, next round 2H 2014 (expected)
  • •Norway 23rd Concession – 2H 2015 (bids due)
  • •United Kingdom – 2015 (expected)
  • •Denmark – Oct 2014 (bids due)
  • • Greenland – Nov 2014 (bids due) and three rounds planned 2016-18

Historical Backlog (MUSD) 2010 - 2014

Capacity Secured for 2014 EUR AMEAP

Summary

  • 2014 on track with Q3 revenues of 190 MUSD
  • Q3 2014 Operating profit of 71 MUSD, 38% of net revenues
  • Q3 2014 multi-client investments of 93 MUSD (55% prefunding)
  • Strong backlog entering into 2015
  • Near term uncertainty in exploration spending
  • Important events expected in 2014 including Norwegian 23rd Exploration Round blocks
  • Long-term future of asset-light, focused multi-client business remains strong
  • Guidance for 2014 unchanged:
  • Multi-client investments 390 – 460 MUSD
  • Average pre-funding 45 – 55%
  • Average multi-client amortization rate 40 – 46%
  • Net revenues 870 – 950 MUSD
  • Contract revenues approximately 5% of total revenues

TGS Performs in all Cycles

  • Average EBIT margin above 40% - stable EBIT – performance through the cycles
  • ROCE significantly above WACC – substantial value creation in any industry cycle

*Peer group includes CGG, Geokinetics, ION Geophysical, PGS, Western Geco, Dolphin, Polarcus Source Platou Markets and TGS

Thank you

©2013 TGS-NOPEC Geophysical Company ASA. All rights reserved.

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