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TGS ASA Earnings Release 2024
3774_rns_2024-05-08_67e5be12-2acc-4eaf-8157-e1e21f2b7806.pdf
Earnings Release
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M A Y 8 , 2 0 2 4
E A R N I N G S R E L E A S E
Q1 2024 Results
Kristian Johansen, CEO / Sven Børre Larsen, CFO O S L O , N O R W A Y
Forward-Looking Statements
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 volatile market conditions, investment opportunities in new and existing markets, demand for licensing of data within the energy industry, operational challenges, and reliance on a cyclical industry and principal customers. 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.
S U M M A R Y
Q1 highlights
Total POC revenues of USD 227 million compared to USD 229 million in Q1 2023
- Late sales of USD 72 million in Q1 2024 vs. USD 46 million in Q1 2023
- POC Early sales of USD 78 million (early sales rate of 116%) compared to USD 98 million (73%) in Q1 2023
- Proprietary revenues of USD 78 million compared to USD 86 million in Q1 2023
POC EBIT of USD 40 million compared to USD 25 million in Q1 2023
PGS transaction expected to close on or around 1 July 2024, subject to final regulatory clearance
Cyclical upturn in progress - TGS well positioned to benefit
E A R N I N G S R E L E A S E
Operational Highlights
Q1 2024
Data acquisition activity in Q1 2024
Q 1 2 0 2 4 R E S U L T S
5
Penyu Basin 3D Offshore Peninsular Malaysia
- Partnership with Malaysia Petroleum Management (MPM), PETRONAS and JV partners PGS and SLB to acquire 7,800 km2 of modern 3D data
- Ramform Sovereign vessel mobilized utilizing state-of-the-art Geostreamer technology to better derisk subsurface
- Provides insights for upcoming Malaysian Bid Round and assesses carbon storage potential; supporting both oil and gas exploration and CCS initiatives
- Acquisition anticipated to complete Q3 2024
- Processing anticipated to complete Q2 2025
6
OBN Acquisition Contract in North America
- TGS secures a six-month-plus contract by a returning client
- Project is expected to commence in Q3 2024
- OBN survey is expected to deliver highquality seismic data to drive decisionmaking
- Reinforces position in North America
Multi-Client Wind & Metocean Campaign Offshore Germany
- Utilizes LiDAR buoys with additional wave and current sensors, reducing costs and timelines for offshore wind developers
- Green Rebel-supplied buoys off Germany provide 24-month wind data suite
- Includes 12 months of metocean data
- Delivered via the TGS Wind AXIOM platform
- Supports decisions for current and future German Bight wind lease rounds
- Demonstrates commitment to global offshore wind energy growth
Update on PGS merger
- Norwegian Competition Authority gave clearance on 17 April, ahead of deadline on 22 April
- Competition & Markets Authority (CMA) in the UK initiated phase 1 with launch of merger inquiry on 12 April
- Deadline for phase 1 decision is 11 June
- TGS expects a positive decision in phase 1
- Legal merger transaction expected to close at or around 1 July 2024
- Subject to positive decision by CMA following phase 1 review
E A R N I N G S R E L E A S E
Financials
Q1 2024
POC Revenues by type
Proprietary Sales Revenue Total Revenue
MUSD
Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024
72 59 72
POC Revenues by Business Unit
Acquisition Total Revenue
Operating Costs and POC EBITDA
Other Operating Costs POC EBITDA
Amortization, Depreciation and POC EBIT
POC Operating Result Multi-Client Investments and Early Sales Rate
Acquisition - Cost of sales and IFRS 16 depreciation
Cost of sales IFRS 16 depreciation
Bridge POC Revenues to IFRS Revenues
IFRS – Profit & Loss
| (MUSD) | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Early Sales | 2.7 | 41.9 | -94% |
| Late Sales | 71.9 | 45.5 | 58% |
| Proprietary Sales | 77.5 | 85.7 | -10% |
| Total revenues | 152.1 | 173.2 | -12% |
| Cost of sales | 35.0 | 57.8 | -40% |
| Personnel cost | 32.5 | 31.3 | 4% |
| Other operational costs | 16.8 | 20.6 | -18% |
| EBITDA | 67.9 | 63.5 | 7% |
| Straight-line amortization | 40.7 | 39.6 | 3% |
| Accelerated amortization | 6.5 | 12.2 | -47% |
| Impairments | 0.0 | 0.0 | n/a |
| Depreciation | 30.1 | 18.5 | 62% |
| Operating result | -9.4 | -6.8 | 39% |
| Financial income | 1.2 | 2.3 | -48% |
| Financial expenses | -4.3 | -6.1 | -29% |
| Exchange gains/losses | -8.3 | -1.0 | 716% |
| Gains/(losses) from JV | 0.0 | -1.3 | -100% |
| Result before taxes | -20.9 | -12.9 | 62% |
| Tax cost | -4.4 | -4.2 | 4% |
| Net income | -16.5 | -8.7 | 90% |
| EPS (USD) | -0.13 | -0.07 | |
| EPS fully diluted (USD) | -0.13 | -0.07 |
IFRS – Balance Sheet
| Change from | ||||
|---|---|---|---|---|
| (MUSD) | Q1 2024 | Q4 2023 | Q4 2023 | Q1 2023 |
| Goodwill | 384.6 | 384.6 | 0% | 384.6 |
| Multi-client library | 772.8 | 753.1 | 3% | 656.3 |
| Deferred tax asset | 73.2 | 67.9 | 8% | 86.0 |
| Right-of-use assets | 135.6 | 78.2 | 73% | 65.3 |
| Other non-current assets | 241.9 | 229.7 | 5% | 222.1 |
| Total non-current assets | 1,608.1 | 1,513.5 | 6% | 1,414.4 |
| Cash and cash equivalents | 159.8 | 196.7 | -19% | 208.0 |
| Accounts receivable and accrued revenues | 191.7 | 156.9 | 22% | 164.2 |
| Other current assets | 157.4 | 89.3 | 76% | 79.9 |
| Total current assets | 508.9 | 442.9 | 15% | 452.1 |
| TOTAL ASSETS | 2,117.0 | 1,956.4 | 8% | 1,866.5 |
| Total equity | 1,242.0 | 1,275.6 | -3% | 1,208.9 |
| Deferred tax liability | 16.2 | 16.4 | -2% | 17.2 |
| Non-current lease liability | 59.9 | 41.3 | 45% | 32.3 |
| Other non-current liabilities | 100.0 | 41.2 | 143% | 47.0 |
| Total non-current liabilities | 176.1 | 99.0 | 78% | 96.5 |
| Taxes payable, withheld payroll tax, social security and VAT | 75.6 | 78.4 | -4% | 71.9 |
| Current lease liability | 83.1 | 43.9 | 89% | 39.8 |
| Deferred revenue | 343.9 | 276.1 | 25% | 122.1 |
| Other current liabilities | 196.4 | 183.6 | 7% | 327.4 |
| Total current liabilities | 698.9 | 581.9 | 20% | 561.1 |
| TOTAL EQUITY AND LIABILITIES | 2,117.0 | 1,956.4 | 8% | 1,866.5 |
IFRS – Cash Flow
| (MUSD) | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Operating activities: | |||
| Profit before taxes | -20.9 | -12.9 | 62% |
| Depreciation/amortization/impairment | 77.3 | 70.3 | 10% |
| Changes in accounts receivable and accrued revenues | -34.8 | 76.1 | -146% |
| Changes in other receivables | -9.4 | 4.1 | -332% |
| Changes in other balance sheet items | 85.9 | 48.5 | 77% |
| Paid taxes | -4.7 | -7.9 | -41% |
| Net cash flows from operating activities | 93.4 | 178.2 | -48% |
| Investing activities: | |||
| Investments in tangible and intangible assets | -23.2 | -7.6 | 206% |
| Investments in multi-client library | -61.5 | -66.9 | -8% |
| Interest received | 1.4 | 2.1 | -33% |
| Net change in interest bearing receivables | -58.2 | 0.0 | n/a |
| Net cash flows used in investing activities | -141.4 | -72.3 | 95% |
| Financing activities: | |||
| Net change in interest bearing debt | 58.2 | 0.0 | n/a |
| Interest paid | -3.7 | -1.8 | 106% |
| Dividend payments | -18.3 | -17.4 | 5% |
| Repayment of lease liabilities | -20.2 | -11.6 | 74% |
| Acquisition of shares | 0.0 | -54.4 | -100% |
| Net cash flows from/(used in) financing activities | 16.0 | -85.2 | -119% |
| Net change in cash and cash equivalents | -32.1 | 20.6 | -255% |
| Cash and cash equivalents at the beginning of period | 196.7 | 188.5 | 4% |
| Net unrealized currency gains/(losses) | -4.9 | -1.1 | 351% |
| Cash and cash equivalents at the end of period | 159.8 | 208.0 | -23% |
Dividends
3.5% 3.6% 4.0% 3.9% 4.9% 5.2% 3.7% 2.8% 2.6% 4.0% 4.5% 4.6% 4.3% 3.8% 5.9% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Year of payment
The Board has resolved to maintain the dividend of USD 0.14 per share for Q2 2024
• Ex date 16 May 2024 – payment date 3 June 2024
TGS has returned more than USD 1.4 bn to shareholders through dividends and buybacks since 2010
-
Quarterly dividends defined in USD from 2016. Annual dividends defined in NOK prior to 2016, converted to USD with the FX rate at ex-dividend dates
-
Average yield at the time of announcement of dividends
E A R N I N G S R E L E A S E
Outlook
Q1 2024
More oil and gas needed to meet long-term energy demand
Oil and gas supply
250
"In the near term, the markets are not balanced; supply, demand is not balanced. 2025 and beyond is when the world is going to be short of oil"
Vicki Hollub, CEO Occidental
Exploration recovery takes time
E&P companies compensating by M&A
Corporate M&A transactions in the E&P industry
Source: SEB research Source: EIA
250
- Exploration spending has been lagging total E&P spending growth
- E&P companies have maintained RRR by doing M&A
Significant upside potential in seismic market
- The global seismic market has seen a recovery from 2020-21 – but still low in a historical perspective
- Current seismic data spending too low to support significant improvements in organic reserve replacement
Source: ABGSC Research
Acquisition activity plan
POC contract backlog & inflow
Contract Backlog
Timing of expected recognition of Acquisition backlog
Q2 2024 Q3 2024 Q4 2024 2025+
Acquisition backlog including awards after quarter close accounts for approximately USD 360 million of the total backlog
Q 1 2 0 2 4
Summary
Total POC revenues of USD 227 million compared to USD 229 million in Q1 2023 High POC early sales rate of 116% Strong development in multi-client late sales, up 58% year-over-year POC EBIT of USD 40 million compared to USD 25 million in Q1 2023 PGS transaction expected to close on or around 1 July 2024, subject to final regulatory clearance Cyclical upturn in progress - TGS well positioned to benefit
E A R N I N G S R E L E A S E
Q1 2024
IFRS contract backlog & inflow
Contract Backlog
Timing of expected recognition of Early Sales contract backlog
Q2 2024 Q3 2024 Q4 2024 2025+
Early Sales backlog accounts for USD 510 million of the total backlog
N O R T H A M E R I C A
Canada:
2025
• Newfoundland Q4 2024 (close) • NW Orphan and Jeanne d'Arc
US GOM: • Updated 5-year Plan Lease Sales commence in
L A T I N A M E R I C A
Brazil:
- Permanent Offer 4 Q4 2023 (closed; awards pending signature expected Q2 2024)
- Permanent Offer 5 2024 (open round)
- Permanent Offer 6 2025 (open round)
Guyana:
• Offshore - Q3 2023 (closed; PSC's pending)
Suriname:
• 2 nd Shallow Water – H1 2024 (close)
Trinidad:
- Shallow Water Round Q2 2024 (close)
- Deep Water Round Q4 2024 (open)
Argentina:
• Offshore Round 2 – 2024 (open)
A F R I C A
Angola:
- 2025 round 10 blocks
- Out of Round direct awards legally decreed
Libya • Licensing round schedule planned Q4 '24
Gabon:
• Open Door
Ghana: • Open Door for available blocks
Liberia: • Open Door – indefinite end
Nigeria: • Licensing round announced close Q4 24
Mauritania • Licensing round schedule being planned
Mozambique:
• Unawarded Blocks available for direct award
Senegal:
• Open Door – LR planned Q4 2024
Sierra Leone:
• Open Door
Somalia:
• Announced but now rescinded – LR in 2024
License Round Activity
A S I A - P A C I F I C
Australia:
- 2023 CCS Acreage Release (closed; award Q2 2024
- 2021 & 2022 Acreage Release (to be announced)
India:
• Bid Round IX ongoing (28 blocks offered in total)
Bangladesh:
• Offshore round –March 2024 (open) to Sep 2024 (close)
Indonesia:
- Open door policy (JSA mechanism)
- 2024 round to be announced Q2 2024
Malaysia:
• 2024 MBR – Jan 2024 (open) to Aug 2024 (close)
Overview is showing scheduled rounds only and is not exhaustive. Several countries, particularly in Africa and Latin America, are planning rounds over the next couple of years
E U R O P E
• 2023 APA Round – Q1 2024 (awarded)
• 33rd UK Offshore Round – Q2 2024 (3rd
Norway:
• 2024 APA Round – Q2 2024 (open)
Tranche awarded)