TGS C it l M k t D TGS Capital Markets Day Oslo, Norway 8 June 2011
Safety Briefing
Agenda 08:30 09:00 TGS Market and a View Forward Robert Hobbs, CEO R b H bb CEO 09:00 09:30 Financial Status: The Multiclient Business Model Kristian K. Johansen, CFO 09:30 10:00 Emerging Areas: A Long Term Investment g g g Kjell…
8 June 2011 Capital Markets Day TGS Market and a View Forward TGS Market and a View Forward
TGS Overview
TGS i B i f TGS in Brief Asker Stavanger Houston London Perth Leading provider of multiclient seismic data and related geoscientific products to the oil & gas industry. Main offices: Houston and Oslo Regional offices:…
Organization Organization R b t H bb Robert Hobbs Chief Executive Officer Kristian Johansen Chief Financial Officer Stein Ove Isaksen Senior VP North & South America Rod Starr Senior VP Africa, Middle East and Asia Pacific…
C Company Milestones Mil t 9
A Leading and Unique Player TGS TGS is a major player within the multi is a major player within the multiclient client market with a market share of market with a market share of approximately 21% Strong balance sheet with no…
TGS has Become More Diversified Geographical revenue split 2005 2010 15 % 17 % 36 % 11 % NSA NSA EUR EUR 57 % 21 % AMEAP AMEAP OTHER OTHER 17 % 25 % 11
but Business Model Remains Unchanged b tB i M d lR i U h d Multiclient focus (95%) Develop, manage, own and control G&G data Sell licenses to data (a Product not a Service) Customers get use of the data at a fraction of the cost…
TGS C TGS Core Businesses B i Permanent Reservoir Geophysical Data Monitoring (New) Geological Imaging Services 2D Seismic Integrated Permanent Digital well data Seismic processing 3D Seismic Reservoir Monitoring solutions…
External Factors Influencing Supply and Demand External Factors Influencing Supply and Demand Supply Demand 14
Reserves Replacement Correlate to Investment Cycles Reserves Replacement Correlate to Investment Cycles Worlds Liquid Fuels Supply 120 Oil and gas reserves declined from l d d l df 20032009 by 5.9% 100 Globally we are producing…
L Longterm Oil Supply More Expensive to Produce Oil S l M E i P d Brazil Brazil, Kazakhstan, Azerbaijan only nonOPEC countries where significant production increases Kazakhstan Azerbaijan only non OPEC countries where…
Gl b l E&P S Global E&P Spending Expectations di E t ti According to Barclays 2011 E&P 600 40 % spending survey, global E&P d l b l & expenditures will increase by 11% to 500 30 % 490 BUSD in 2011 The The average oil price…
V Vessel Supply Growth Supports Asset Light Model lS l G th S t A t Li ht M d l Vessel and streamer count 2005 2012 estimates 90 900 80 800 70 700 60 600 50 500 40 400 30 300 20 200 10 100 0 0 2005 2006 2007 2008 2009 2010…
Market Implications/Key Considerations for TGS Market Implications/Key Considerations for TGS Observations/Trends TGS Positioning and Strategy Global GDP growth drives 40% increase in Global GDP growth drives 40% increase in TGS TGS…
8 June 2011 TGS Capital Markets Day Finance Status: The Multi Client Business Model Finance Status: The MultiClient Business Model
Agenda Financial Overview P&L components trends and descriptions Cash flow (LTM) Balance sheet Multiclient Library Accounting principles Vintage analysis Vintage analysis Performance Through the Cycle Success Formula…
Financial Overview Financial Overview
Revenue Development per Year Prefunding vs. Late Sales 600 582 568 17 (3%) 25 (4%) 84 (14%) 500 478 453 33 ((7%)) 396 55 (12%) 400 19 (5%) 380 (67%) 338 300 (58%) 321 240 (67%) 8 (3%) 312 301 (69%) 200 (76%) 191…
R Revenue Development per Year D l t Y Geographical Composition 600 582 568 102 98 500 (18%) 478 (17%) 453 92 396 75 (19%) 400 145 (17%) 195 57 (15%) (25%) (34%) 86 (19%) 134 300 64 (16%) (28%) 240 118 44 (11%) 79…
Cost Breakdown and Description 2010 Breakdown Cost Components Cost of goods sold Direct cost related to proprietary contract projects Cost of stock options Corresponding revenues recognized as proprietary revenues Depreciation…
Multiclient Revenues and Amortization Rate 180,000 60 % 160,000 50 % 140,000 120,000 40 % 100,000 30 % 80,000 60,000 20 % 40,000 10 % 20,000 , 0 0% MC revenues A Amortization ti ti rate t ((r.axis) i ) 26
Cash Flow Development LTM 1,000 900 85 800 4 69 700 11 600 256 597 500 400 89 20 300 200 385 282 100 Balance per Received COGS, salaries FX and other Tax CAPEX and Multi client Dividend and Other…
Balance Sheet as of 31 March 2011 As of 31 March 2011, TGS does not Other 91 176 Current have any interest bearing debt Goodwill 46 liabilities Cash and cash equivalents represents 92 Noncurrent USD 406 million, corresponding to…
Q2 2011 Updates Busy vessel season with four 3D vessels active during the quarter Seisquest continuing to acquire 3D offshore Indonesia Polar Duke started a survey in the Barents Sea in midMay Oceanic Challenger operating from early…
Multi client Library Multiclient Library
M lti li t A Multiclient Accounting ti Multiclient seismic data amortized on a project to project basis as a function of sales Accounting standards recommend to match revenues and costs over time g TGS capitalizes the direct costs of…
Investments per Vintage Q1 2011 Investments per Vintage Q1 2011 Net Book Value (NBV) in % of original investment vs. allowed maximum % (yearend) 350 100 % 299 294 300 258 250 200 60 % 57 % 150 131 42 % 100 53 25 % 50…
Historical Net Book Value 70 % Net Book Value of Multiclient Library 60 % 58% Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 205 252 366 453 471 50 % 48% 40 % 34% 64 % 30 % 30 % 59 % 58 % 57 % 57 % 53 % 49 % 46 % 44 % 20% 42…
Performance Through the Cycle P f Th h th C l Success Formula
Success Formula Diversified EBIT Margins vs. Seismic Peers 80 Data Library 60 40 20 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Countercyclical Investments 20 40 60 80 100 TGS Comp A Comp B…
Diversified Data Library f MC seismic projects completed per year TGS data library consists of several GS d lib i f l 60 hundred projects characterized by a 50 high degree of diversification in terms Number of projjects of:…
C Countercyclical Investments t li l I t t TGS has increased investments significantly 350 MC Investments vs. vessel rates* 300 from the pre2008 level and average spending 300 250 over the last 3 years is 283 MUSD th l t 3 i 283…
M lti li t A Multiclient Accounting ti 60% EBIT Margin vs. Sales From Old Vintages 30% TGS amortization policy requires all projects to 50% 25% be fully written off by the end of year four after y y y 40% 20% completion…
Summary TGS has become a more diversified company and revenues are equally spread between many different regions Amortization cost represents almost of total cost Higher revenues = Lower amortization % Despite the increased…
8 June 2011 Capital Markets Day Emerging Areas: A Long Term Investment Emerging Areas: A Long Term Investment
A d Agenda Introduction t oduct o TGS global multiclient seismic database The TGS multiclient way Case Study Case Study Greenland Greenland Historical development Local terms and database build up Investment and…
TGS Worldwide Data Coverage 2.58 million kilometers 2D 175,400 square kilometers 3D 42,100 square kilometers WAZ 1.23 million kilometers grav/mag 796 000 kil 796,000 kilometers airborne data t ib d t 402,000 square…
TGS P j t C l TGS Project Cycle Risk Analysis Risk Analysis Sales/Marketing/Service Political, Market, Account Service, Sales Campaigns, Geological Data Interpretation High quality seismic data in the right place at the…
TGS Data and Risk Mitigation TGS Data and Risk Mitigation CRITICAL PHASE TIME & AREA Rissk Grav/Mag 2D Regional Interpret. Ranking MCEM Ranking MC3D Value/cost PRM 44 Cost
Greenland A Case Study
Greenland A Key Emerging Province Greenland A Key Emerging Province Local support for exploration Fiscal terms seen as reasonably attractive with 4555% State take at 75/bbl State take at 75/bbl West Greenland is three times the…
G Greenland l d TGS began discussions with BMP to promote exploration in 1997 promote exploration in 1997 Evaluation of existing data; wells, seismic (Nunoil and Geus) data circa 1997/98 Hydrocarbon potential is strong and…
West Greenland Petroleum System Works West Greenland Petroleum System Works TGS sponsored field trips to Greenland to capture interest Oil seeps exist onshore Hydrocarbon can be found in the rocks Hydrocarbon can be found in the…
TGS Longterm Commitment to Develop Greenland TGS acquires 2D data TGS acquires 2D data 1999 4,900 km 2000 6,200 km 2001 1,000 km 2002 6,731 km 2003 7,200 km 2003 7,200 km 2005 5,600 km 2007 6,800 km 2008 9,000 km 2008 9 000…
Greenland Potential Fields Data Greenland Potential Fields Data TGS acquires aeromagnetics and aerogravity g y 2006 37,000 km 2007 10,400 km 2008 108,800 km , 2009 41,300 km 2010 72,000 km TGS creates geoscientific atlases…
Greenland Additional Potential Additional Potential Gulf of Mexico Compare 2D data coverage in Baffin Bay to very mature basins around the world Density of data coverage in Baffin Bay is significantly reduced In the Gulf of…
I Investment Development Greenland t tD l tG l d Sales vs. investments (cum) Library size and customer development 100 100,000 000 25 25 80,000 20 omers 60,000 15 km Custo MUSD 40,000 10 20,000 5…
N hE G North East Greenland l d The Mirror Image of Norwegian Sea Geology 53
G Greenland Summary l dS Seasonal Acquisition First survey 1999 Limited early investment Confidence in market Confidence in market Steady database build up Client base growing prior to g gp new licesning round Margin grows as…
NW Europe Atlantic Margin Revival A Case Studyy
NW Europe Atlantic Margin NW Europe Atlantic Margin Well known and attractive exploration and license regime Extensive client base L Low risk political environment i k liti l i t Data relinquishment terms Seasonal limitations…
NW Europe 2003 NW Europe 2003 Mature region TGS has 500,000 km historic multiclient 2D data Area dominated by shallow Area dominated by shallow exploration models Emerging trend is for long offset/deep targets Pilot Project:…
NW Europe Re emerges NW Europe Reemerges After pilot project: 270,000 After pilot project: 270 000 km new long offset multi client 2D data acquired Special imaging project group achievement during p processing of new data…
Outer Norwegian Sea Outer Norwegian Sea Original New processing 59
D l Development Atlantic Margin Revival t Atl ti M i R i l Sales vs. Investment (Cum) Library size and customer development 300,000 60 250,000 50 200,000 40 Customerrs MUSD km 150,000 30 100,000 20 50,000…
Atl ti M i R i l S Atlantic Margin Revival Summary Application of geologic knowledge and technology Processing of new data improves our knowledge of how to revitalize old data revitalize old data Corresponding market and mileage…
Areas for the Future
Undiscovered Resources Undiscovered Resources 2 6 5 4 3 1 1: Brazil: 120 200 BBO and gas unknown 2: Circum Arctic: 90 BBO and 1,668 TCF gas 3: West Africa: 71 BBO and 235 TCF gas 4. South East Asia: 21 BBO and 200 TCF gas…
USGS Assessment of Areas North of the Arctic Circle USGS Assessment of Areas North of the Arctic Circle 70 % of the mean undiscovered resources north of the Arctic th f th A ti Circle is estimated to occur in five provinces:…
Summary The multiclient model has proven successful Th lti li t d lh f l Geologic control and the application of proper technology are critical Tight relationship between data base build up and client base All data types will be…
Break
8 June 2011 Capital Markets Day Investing In a Clearer Picture Investing In a Clearer Picture
Agenda d TGS investment in proprietary processing technology Evolution of imaging techniques The story of Mississippi Canyon 3D Timeline of acquisition and processing Data examples of improvement Financial return Update on…
TGS Investment in Proprietary p y Processing Technology
TGS Invests in Proprietary Imaging Strategy to add value to multiclient library Strategy to add value to multiclient library BIPS Acquisition in October 1998 Nutec Acquisition in July 2004 PDS Acquisition in May 2007 Growing R&D…
Evolution of Imaging Techniques
Computer Power and Cost Comparison d i The increase in computer power and p p 1,000,000,000 17 capacity over time allowed 100,000,000 RTM Reelative Computter Power 15 geophysical theory to be applied in 10,000,000 WAZ…
The Story of Mississippi Canyon 3D The Story of Mississippi Canyon 3D
Mississippi Canyon i i i i A Reprocessing Success Story i Originally acquired in 1999 2000 Five separate reprocessing projects The most prolific area of deep water GoM 14,400 km2 Continued demand for new products…
Life Cycle Mississippi Canyon 3D if l i i i i Revival Acquisition Revival Prestack Kirchhoff begins on Freedom time migration project begins Mississippi WAZ ((PSTM) begins ) g processed by p y Canyon 3D initiated…
Original Processing i i l i Year 2000 76
Reprocessing 1 i 2001 77
Reprocessing 2 i 2003 78
Reprocessing 3 i 2005 79
Reprocessing 4 i 2007 80
Original Kirchhoff 81
Kirchhoff WAZ 82
Revenues from Value Added Processing Reprocessing Revenues Original Project Revenues nue ue Cumulaative Sales Reven Cumulativve Sales Revenu 4 years after completion normal life cycle normal life cycle slow…
TTaking Reprocessing Success ki R i S Around the World
TGS Worldwide Library More than 1,230,000 km of reprocessed 2D data in the TGS library More than 117,500 km2 of reprocessed 3D data in the TGS library Total library reprocessed is roughly 50% of the total library acquired…
Closing the Gap Seismic vs. Well Data Resolution Closing the Gap Seismic vs Well Data Resolution Seismic Seismic data has strong data has strong horizontal resolution Well data provides strong p g vertical resolution Seismic…
Seismic Resolution vs Well Log Resolution Seismic Resolution vs. Well Log Resolution…
Summary Summary Processing technology changes more rapidly than Processing technology changes more rapidly than acquisition technology By owning the data, value can be generated from processing improvements processing…
8 June 2011 Capital Markets Day Well Data: Evolution of Data Formats and Data Integration Well Data: Evolution of Data Formats and Data Integration
Agenda TGS Geologic Products An Introduction What is Well Data and Why is it Important Data Formats and TGS Investment D t F t d TGS I t t A Case Study AC St d Data Integration Opportunities 98
TGS Geologic Products An Introduction TGS Geologic Products An Introduction
Geologic Products Geologic Products Formed in 2007 from A2D (well data) and Aceca (interpretation) entities 320 employees l 1015% of total TGS revenue Substantial backlog Similar growth rate and EBIT margin to main seismic…
TGS C TGS Core Businesses B i Permanent Reservoir Geophysical Data Monitoring (New) Geological Imaging Services 2D Seismic Integrated Permanent Digital well data Seismic processing 3D Seismic Reservoir Monitoring solutions…
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