ION Geophysical Corporation Pareto Securities 21st Annual Oil & Offshore Conference Greg Heinlein, SVP and Chief Financial Officer September 2014
Todays Discussion ION Strategy Preparing for the Upturn Business Segments Overview Financial Results 3
Challenging Business Climate Large discoveries declining over time Emerging countries no longer driving excess demand over production Global political unrest creating uncertainty and supply disruptions offsetting emerging…
Challenging Business Climate Since 2010, the industry shortfall between cash earnings and 110B shortfall expenditures (mainly capex and in 2013 dividends) has widened from 18 billion to 110 billion Companies have been borrowing…
Current State of Global E&P & Seismic Industry E&P Spending Projected Shift from Exploration to Production Continued growth in US unconventionals Shift from IOCs and majors to NOCs and Independents Seismic Spending Declining…
ION Strategy Positioning for the Upturn Positioning for the Upturn ION Strategy Gradually shifted to E&P solutions Develop and leverage 45% revenues in 2009 estimated 80% in 2014 innovative technologies Systematically moving…
Delivering Value Across the E&P Lifecycle 8
Todays Discussion ION Strategy Positioning for the Upturn Business Segments Overview Financial Results 9
Business Segments Overview YTD June 2014 Revenues OI OM Solutions 12% New venture revenue down 29%, data library down 13%, & data processing up 3% 39% 57% Softness in underwriting of new programs, 1H 14 investment of 34M compared…
ION Strategy Changing Composition of ION Business 2009 - 2013 E&P Solutions Revenue % E&P growth driven by Solutions 50% 2013 - 2014 De-emphasis of Systems equipment 2009 Implementation of OBS strategy / OceanGeo 25% 75%…
Solutions Segment Diversifying the Portfolio Across the E&P Lifecycle ION Solutions ION Solutions Revenue Segment Mix Mix Revenue Data Processing Relevant across all phases of the E&P Expect multiple increase in lifecycle…
Multi-client Revenues Aligned with International Exploration +4.5% -0.2%% +7.9% +15.5% United States +9.6% 164 141 139 150 +8% ION NV and DL Revenues (1H 14) +8.5% ResSCAN 3D Land Programs BasinSPAN 2D…
Multi-client Data Library Well Positioned for License Rounds Alaska: Egypt: Ireland: Lease planned 2016 & 2017 Ganope Intl Round 2014: 20 blocks Round open April 2014 - Sept 2015 Canada Nova Scotia: India: Norway: Rounds in 2014…
Solutions Segment Changing Data Library Client Mix Mix of Data Library Revenues Solid data library sales by Customer Type (M) Shift from IOCs to NOCs NOCs and Independents picking up assets as IOCs focus on cash and…
Multi-client Investments and Revenues by Vintage Sales exceed investments for all vintage years by 2.2x (pre- 2013) High pre-funding on new investments (WIP) 70% Amortization primarily based on sales method (ratio of cost to…
Ocean Bottom Services Segment Growing Demand for Ocean Bottom Seismic OBS strong growth continues, OBS Acquisition Services Expenditure Millions outpacing towed streamer 1400 1200 Fastest-growing segment, 1000 800 with 400%…
Ocean Bottom Services Segment Fully Integrated OBS Solution Increased ownership in OceanGeo to 100% Provides high-value route-to-market for IONs Calypso OBS technology Completed 5-month, 540 sq km 3D seismic survey offshore…
Software Segment Increasing E&P Focus Record First Half ION Software Segment Revenue Mix E&P Software Solutions SimOps for Expect significant increase simultaneous operations in Software segment Narwhal for Ice revenue 2013 -…
Systems Segment Restructured for Profitability Focus on Ocean Bottom Seismic Consistent with strategy, de-emphasizing equipment business Restructured in 2H 13 for long-term profitability Improved Systems margins, resulting from…
Summary Executing our strategy Focus on oil & gas solutions Active in OBS segment OceanGeo off to solid start Programs in E&P hot spots 1H 14 revenues up 6% Y/Y Positioning for upturn Diversifying across higher value areas of…
Todays Discussion ION Strategy Positioning for the Upturn Business Segments Overview Financial Results 22
1H 2014 Highlights Financial 1H 14 revenues up 6% Y/Y 46M of revenue from OceanGeo Record 1H revenues for Software Operating margins improved to 9%, up from 3% Y/Y Cash and cash equivalents of 158M at June 30, 2014 Entered…
Financial Overview 1H 2014 Revenue M Revenues up 6% Y/Y Solutions down 15% Software up 20% Systems down 15% OceanGeo revenues from Trinidad project Solutions Systems Software Operating Margin up to 9% Ocean Bottom…
ION Historical Financial Results ( in Thousands) Revenue Adj. EBITDA and Adj. EBITDA Margins 190,057 163,810 176,832 155,894 157,882 37% 34% 36% 31% 29% 2010 2011 2012 2013 TTM Q2 14 Solutions Systems Software Ocean…
Financial Overview Cash Flow ( in Thousands) SUMMARIZED CASH FLOW FY 12 FY 13 YTD Jun 14 Cash from operations 195,712 128,271 53,785 Working capital (26,412) 19,085 22,953 Multi-client investment (145,627) (114,582) (34,317)…
Financial Overview Balance Sheet as of June 30, 2014 Capital Employed M Capital Book Value M 700 600 500 243M 246M 400 300 200 197M 158M 100 241M 191M 44M 33M 0 Q1 14 Q2 14 Cash Other Working Capital LT Debt…
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