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TGS ASA Earnings Release 2014

Jul 31, 2014

3774_rns_2014-07-31_60291737-073d-4c2d-91d2-f5be7d5a0627.pdf

Earnings Release

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TGS Q2 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 205 MUSD compared to 210 MUSD in Q2 2013
  • Net late sales of 137 MUSD, down 12% from 155 MUSD in Q2 2013
  • Net pre-funding revenues of 60 MUSD were up 39%, funding 52% of TGS' operational multi-client investments for the quarter (114 MUSD)
  • Operating profit for the quarter was 82 MUSD, 40% of net revenues, compared to 98 MUSD (47% of net revenues) in Q2 2013
  • Dividend payments of NOK 8.5 per share were paid in June
  • Four 3D vessels, one 2D vessel and one land crew operating under TGS control in Q2 2014
  • TGS was also a participant in one 2D marine JV project, one high resolution P-CableTM marine JV project and one CSEM marine project during Q2 2014
  • TGS awarded new large 3D multi-client project in Australia of 13,000 km2

Continuing to build backlog – Nerites Season 2

Nerites Season 2

  • Australian 13,000 km2 multi-client 3D survey expected to commence in late 2014 or early 2015
  • Second season of the Nerites 3D seismic survey to fulfill work program commitment over EPP44 and EPP45 awarded November 2013
  • Prospective frontier acreage with block relinquishment expected in 2019
  • Solid prefunding but high amortization due to timing of relinquishments

Operational Highlights

Q2 2014 Operations

Q2 Activity – North America

Central Gulf of Mexico

  • Francisco – 6,700 km2 multi-client 3D survey completed in Q2 2014
  • Long offsets utilized (12,000 m)
  • First 3D survey in the frontier basin floor fan play in Atwater Valley and Lund areas of the Central Gulf of Mexico.
  • Leverages adjacent TGS 3D data and utilizes TGS' Clari-Fi™ broadband processing technology

East Canada

  • 30,000 km 2D seismic data to be acquired offshore Newfoundland Labrador during 2014 in partnership with PGS

  • Targeting Sectors announced for Newfoundland Labrador's new Scheduled Land Tender system and complements TGS' existing 47,500 km of 2D in this region
  • Data being acquired utilizing PGS' Geostreamer® technology with data processing performed by TGS

8

Q2 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

Q2 Activity – UK & Australia

West of Shetland

  • Brendan Basin 2,500 km2 multi-client 3D survey
  • Data being processed utilizing TGS' proprietary Clari-Fi™ broadband technology
  • Erlend Basin - 900 km2 survey announced for Q3 2014 acquisition to bring total volume of recent TGS 3D data in the area to >18,400 km2

Great Australian Bight

  • Nerites 8,300 km2 multi-client 3D survey covering two of the newly released petroleum exploration blocks which are located mostly in the deep water Ceduna sub-basin
  • Data being processed utilizing TGS' proprietary Clari-Fi™ broadband technology
  • Upon completion the TGS 3D multi-client library offshore Australia will exceed 32,500 km2
  • TGS awarded 13,000 km2 phase 2 to commence in Q4 2014

Q2 Activity – North America Onshore

Rush Creek

  • 440 km2 multi-client 3D project in Texas completed in Q2 2014
  • Builds on existing 160 km2 3D survey recently purchased by TGS
  • Will illuminate subsurface targets in the Granite Wash, Hogshooter, Cleveland Sands, Atoka and Tonkawa geological trends

Utica Play

Permitting and surveying ongoing on previously-announced Freeport and Waterford surveys to start in H2

Enhancing Value through Technology

  • TGS applies appropriate technologies to address imaging challenges associated with specific geologies and operating environments
  • TGS acquires complementary data products to expand and enhance its geoscience data library

Financials

Key Financials

EBIT before non-recurring items

Multi-client NBV and Investments (operational)

Cash Flow from Operations

Net Revenue Breakdown

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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 3.4 million has been implemented at end of Q2
  • Dividend and share buy back program represent approximately USD 170 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

EUR

  • 2014 Northwest Europe acquisition season under-way with 2D, 3D, P-CableTM, CSEM and Seafloor Sampling surveys in the Barents Sea and 3D surveys West of Shetland
  • Norwegian 23rd Licensing round and APA round announced
  • Hoop basin block nominations following Wisting Central discovery
  • 36,000 km multi-year project in Greenland
  • NSA
  • BOEM has commenced process to develop next five year leasing program in U.S (2017-2022)
  • Sectors announced for Newfoundland Labrador's new Scheduled Land Tender system
  • Vessels secured for entry into Mexico (subject to legislation and permit)
  • Return to onshore Utica play with two projects announced for 2H 2014
  • AMEAP
  • TGS awarded Nerites Season 2 (13,000 km2 3D multi-client survey)
  • 17,000 km 2D multi-client survey planned in Northwest New Zealand
  • Awaiting Africa license round announcements

License Round Activity and TGS Positioning

North & South America

  • •Central GOM – Mar 2015 (5-Year Plan)
  • •Western GOM – Aug 2014 (5-Year Plan)
  • •Alaska Offshore - 2016 & 2017 (5-Year Plan)
  • • Newfoundland & Labrador – Nov 2014, Nov 2015 & Nov 2017 (bids due)
  • •Nova Scotia – Oct 2014 (bids due)
  • •Canada Onshore – at least monthly
  • •Brazil - 2015 (expected)

Africa, Middle East, Asia Pacific

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

Europe / Russia

  • •Norway APA – Sep 2014 (bids due)
  • •Norway 23rd Concession – H2 2015 (bids due)
  • •United Kingdom – Apr 2014 (closed)
  • •Denmark – Oct 2014 (bids due)

Historical Backlog (MUSD) 2010 - 2014

Capacity Secured for 2014 EUR AMEAP

3
D
Ve
l
s
s
e		 Ja
n		 Fe
b		 Ma
r		 Ap
r		 Ma
y		 Ju
n		 Ju
l		 Au
g		 Se
p		 Oc
t		 No
v		 De
c
C
G
G
A
l
ize		 Gu
lf o
f M		 ico
ex
B
G
P
Pr
to
os
p
ec
r		 Be
nin
Sa
Sw
i
ft
nc
o		 Bra
zil
JV
Po
lar
Du
he
c
ss		 Au
ali
str
a		 Op tio
n
Ge
Ca
ian
o
sp		 Au
ali
str
a
Ge
Ea
le
co
g		 NW
E
uro
pe
Po
lar
Na
i
la
cu
s		 NW
E
uro
pe
Su
Be
rg
en
rv
ey
or
TM)
(P-C
able		 NW E
JV
uro
pe
2
D
&
O
he
t
r		 Ja
n		 Fe
b		 Ma
r		 Ap
r		 Ma
y		 Ju
n		 Ju
l		 Au
g		 Se
p		 Oc
t		 No
v		 De
c
B
G
P
C
ha
l
len
g
er		 JV
Ma
da		 ga
sc
ar
Ge
Ar
ic
t
o
c		 Ma
da		 ga
sc
ar
Sa
Sp
ir
it
nc
o		 Ca
na		 da
P
GS
JV
At
lan
ic
Ex
lo
t
p
re
r		 Ca
na		 da
P
GS
JV
A
ka
de
i
k
S
ha
k
iy
ts
m		 NW
E
uro
pe		 Gr nla
nd
ee
At
lan
ic
Gu
d
ian
t
ar
(CS
EM)		 NW
E		 EM
GS
JV
ur		 JV
Po
lar
Pr
inc
e (
Sea
floo
r Sa
mpl
ing)		 Ca da
J
V
na
ian
Ju
l
a
(
Sea
floo
r Sa
mpl
ing)		 NW
E
JV
ur
Aq
i
la
Ex
lo
u
p
re
r		 Ne Ze
ala
nd
w
La
d
C
n
re
w		 Ja
n		 Fe
b		 Ma
r		 Ap
r		 Ma
y		 Ju
n		 Ju
l		 Au
g		 Se
p		 Oc
t		 No
v		 De
c
Co
Cr
lo
do
1
&
2
ra
ew
s		 Ch
ey
en		 ne
Cr
Te
xa
s
ew		 Ru
sh		 C
k
ree
Ca
Cr
da
na
ew		 Pe
nd
l
ry		 WO
C
O
h
io
Cr
ew		 Wa
ter		 for
d		 Fre
ort
ep

Summary

  • 2014 on track with Q2 revenues of 205 MUSD
  • Q2 2014 Operating profit of 82 MUSD, 40% of net revenues
  • Q2 2014 multi-client investments of 114 MUSD
  • TGS continues to benefit from its well positioned library and continues to see high quality investment opportunities
  • Strong backlog
  • Application of new technologies
  • Onshore
  • 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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