Capital Markets Day Oslo, 19th December 2014 Performance Through the Cycle
Agenda Capital Markets Day 2014 08:00 PGS and market perspectives Jon Erik Reinhardsen, President and CEO 08:30 Financials Gottfred Langseth, EVP and CFO 08:50 Q&A 09:15 Coffee break 09:30 Marine Contract Magne Reiersgard,…
Capital Markets Day Oslo, 19th December 2014 Jon Erik Reinhardsen President & CEO
Leading Marine Geophysical Company Imaging & Marine Contract MultiClient Operations Engineering Marine market Diverse Productivity Technology leadership MultiClient library leadership differentiation 47% of revenues LTM 42% of…
Strategy for Taking the Lead Lessons Learned from Previous Downturns Conservative financial gearing creates cyclical robustness Long term financing in place Preserving dividend capacity MultiClient reduces earnings volatility…
2014 Achievements Business: Excellent safety and operational record Established export credit financing for the last two Ramform Titan-class vessels Refinanced Term Loan B Dividend of NOK 2.3 per share, an increase of 39% from…
2014 Guidance Update EBITDA expected to be approximately USD 700 million Sub-optimal vessel scheduling due to a weak market Approximately USD 100 million in late sales in Q4 Some further risk of revenue recognition timing 2014 vs.…
Market Context: Low Oil Price Not Sustainable Substantial Incremental Supply At Risk Incremental demand Incremental supply 100/bbl Incremental supply 80/bbl Incremental supply 60/bbl Long term business 3 case still intact 2 Low oil…
Market Context: Low Oil Price Not Sustainable Project Delays Create Supply Shortfall Delays of big-ticket production projects among oil majors would deprive the world of 7.5 million barrels a day of new output over the coming…
Market Context: Low Visibility and Significant Market Uncertainty 60 % Marine contract EBIT margin development 50 % 2015 Marine Contract EBIT margin 40 % expected to be in line with previous trough years 30 % 20 % Seismic…
2015 Guidance EBITDA in the range of USD 550-700 million MultiClient cash investments of approximately USD 275-300 million Pre-funding level at or above 100% Capital expenditures of approximately USD 250 million Of which new…
Asset Light Growth Opportunities Maturing OptoSeis PGS was awarded a Permanent Reservoir Monitoring (PRM) contract with Petrobras over parts of the Jubarte field in 2010 PGS OptoSeis technology is now well proven with outstanding…
Creating Shareholder Value: PGS Strategic Ambition To Care For our employees For the environment and society at large For our customers success To Deliver Productivity Leadership Ramform platform + GeoStreamer Reducing project…
In Conclusion: Well Positioned to Navigate Through a Challenging Market Robust balance sheet No debt maturities before 2018 Cost effective operations Improving productivity Reducing costs further Solid MultiClient sales…
Capital Markets Day Oslo, 19th December 2014 Gottfred Langseth Executive Vice President & CFO
Outline Balance sheet position Dividend Debt structure and maturity profile CAPEX trends MultiClient investment, late sales and pre- funding trends Cost trends Tax Foreign currency Sensitivities - 18-
Balance Sheet Well Positioned for a Challenging Market Liquidity reserve of USD 470.4 3600 Goodwill million at end Q3 2014 Other intangible assets Other In addition USD 267 million of liabilities 3200 undrawn Export Credit…
PGS Ongoing Dividend Policy In 2013 and 2014 PGS distributed approximately 35% of net income in dividend Dividend policy aiming to distribute 25 to 50% of net income as dividends over the business cycle Will consider business…
Dividend is a Priority 2.5 50 % Solid dividend growth PGS targets growth of dividend capacity 2 +39% 45 % and dividend over time Dividend per share in NOK Solid dividend growth since dividend policy 1.5 40 % +50% was introduced…
TLB Extended - Secured Export Credit Financing Term Loan B reduced from USD 470 million to USD 400 million in Q1 2014 Maturity extended from 2015 to 2021 Floating interest rate of LIBOR (minimum 0.75%) + 250 basis points Export…
Debt and Facility Maturities Further Extended December 2013 December 2014 -100 Term Loan B Term Loan B Average remaining time to maturity Refinanced 397m 470.5m increased to 5.0 years due June 2021 due June -400 2015 Senior…
Attractive Debt Structure No Maturities Before 2018 Long term Credit Lines and Interest Nominal Total Financial Covenants Bearing Debt Amount Credit Line September 30, 2014 USD 400.0 million Term Loan (TLB), Libor USD 398.0 None, but…
Rescheduled Delivery Times for New Builds Delivery times for Ramform Tethys and Ramform Hyperion rescheduled to Q1 and Q3 2016 Reduces 2015 CAPEX by at least USD 160 million compared to previous baseline No cost impact for…
Two Last New Builds are Fully Financed Timing of Instalments 200 Available undrawn ECF financing of USD 267 million corresponds 100 Paid NB to remaining yard instalments CAPEX by end 2014 Remaining Cash flow and secured ECF…
Headroom to Maintenance Covenant 3.00 Net interest bearing debt forecasted Indebtedness / Adj. EBITDA 2.50 2.00 to show relatively flat development 1.50 in 2015 1.00 0.50 Good headroom to maintenance 0.00 covenant in the…
2015 Sources and Uses of Cash Expecting Robust Cash Flow in a Weak Market 700 Illustration of 2015 cash flow drivers Cash flow from operations to cover MultiClient investments, NB CAPEX maintenance CAPEX, interest & financing/debt…
Capital Expenditures 2015 Trends and Projections 500 Full year 2014 CAPEX expected to be 450 approximately USD 375 million Of which approximately USD 210 400 million relates to new builds 350 2015 CAPEX plan of approximately USD…
Solid MultiClient Pre-funding 180 % 160 % 2014 MultiClient cash investments of 140 % approximately USD 350 million with a pre-funding level of approximately 90% MC pre-funding 120 % 100 % 80 % MultiClient cash investments…
Increased Sales from a Larger MultiClient Library 400 MultiClient cash investments After PGS sold its Onshore division 300 in 2010, MultiClient was organized USD million as a dedicated business area 200 MultiClient cash…
Beneficial Tax Position Deferred tax assets - Deferred tax assets (USD 105 million at end Q3 2014) will continue to benefit current tax expense for the coming years - Current tax mainly relates to withholding taxes and local taxation…
Foreign Exchange and Sensitivity Cash flow relating to operating income On an annual basis A 10% change of the USD vs. NOK has an annual net EBIT impact of USD 21-23 million before currency hedging activities. A 10% change vs. GBP has…
Key Sensitivities Technical downtime/mobilization delays/standby One month for high capacity vessel could amount to a revenue loss of USD 8-12 million + risk of schedule impact and equipment cost Contract versus MultiClient Given…
Robust Cycle Management Solid financial profile Attractive debt structure with no maturities before 2018 Significant cost and CAPEX reduction in 2015 Flexibility to handle market volatility Benefiting from a strong USD…
Capital Markets Day Oslo, 19th December 2014 Magne Reiersgard Executive Vice President, Marine Contract
Marine Contract What Does the Business Unit Do Marine Contract work is where PGS acquires seismic data under proprietary contracts with its customers covers Streamer Seismic, Towed Streamer Electromagnetics and Permanent Reservoir…
Outline Outlook seismic market Broadband shift Competitive advantage Towed Streamer Electromagnetics Permanent Reservoir Monitoring Summary Photo: Johannes Homuth - 39-
Marine Contract Value Proposition: Better Data Quality AND Higher Efficiency Matter Meeting the clients need for tailor made services Safe and environmentally sound Leading GeoStreamer technology platform facilitating high…
Demand Outlook Western Atlantic Several large programs planned for 2015 summer offshore Eastern Canada, both exploration and 4D US Gulf of Mexico stable activity levels Mexico reform expect first seismic in 2015 under the new…
Demand Outlook Eastern Atlantic Region and Middle East High interest for North Sea Strong growth in Barents Sea licensing rounds, becoming & Russia Arctic but uncertain primarily a MultiClient province volumes due to fall in ruble and…
Demand Outlook Eastern Hemisphere Sakhalin: Higher activity expected for 2015 probably 3 vessels Myanmar: New province opening up prospective acreage could generate up to 40,000 sq.km. over the next 1- Malaysia stable high activity, 2…
High Exploration Interest in New Areas Myanmar Bid round in Myanmar could generate up to 80,000 sqkm of 3D seismic over the next 2-3 years First surveys to begin Q1/2 2015 Q4 2015 post monsoon activity commitments around 30,000…
Decent Order Book Low Visibility PGS booking for 2014 as of Dec. 2013 90 vs. booking for 2015 as of Dec. 2014 80 70 Reduction in leads the last two Percent booked 60 50 years is primarily due to lower 40 prices 30 20…
The Industry Fleet is Adjusting Quite Fast to Lower Spending PGS vessels Competitors vessels Temporarily stacked Recently decommissioned or expected to be decommissioned during 2014 and 2015 700 600 17% capacity 11% 500…
Uniquely Placed in True Broadband Market* PGS has substantial lead in development and Company D deployment of multi component streamer PGS is the only player which does not face Company C substantial CAPEX near term to modernize…
True Broadband Seismic is a Crucial Differentiator Traditional paradigm: fit-for-purpose (i.e., limited purpose) surveys Shallow Development Site Monitoring Exploration hazard 3D seismic Survey 3D Seismic 3D seismic 2-4k km2…
True Broadband Seismic is a Crucial Differentiator Traditional paradigm: fit-for-purpose (i.e., limited purpose) surveys Shallow Development Site Monitoring Exploration hazard 3D seismic Survey 3D Seismic 3D seismic 2-4k km2…
Seismic Vessels Have to Fill All Roles Competitive Advantage Survey type Requirements PGS Capability Large low cost scanning 3D Large vessels 12+ streamer capacity, wide spreads, SWIM imaging 4D Ultra-high streamer count, industry…
Outlook Summary Marine Contract Seismic PGS contract performance for 2015 is underpinned by: Differentiated GeoStreamer technology, unique combination of multi component data and proprietary imaging algorithms as well as the Ramform…
Towed Streamer Electromagnetics (*) Unique value proposition Acquisition efficiency massively higher than node based systems 111 km per day on recent Barents Sea survey Acquired simultaneously with seismic data Independent…
OptoSeis Marine Permanent Reservoir Monitoring (PRM) Marked increase in market opportunities in multiple areas Unique Only available full turnkey system including design, manufacture, installation and imaging Strong track record…
OptoSeis Land 3D Moving from the Lab into the Field Joint development Shell-PGS Step change in scalability, cost, weight, efficiency Optical technology synergies with Optoseis PRM Timeline: 2015: Supply chain ramp up and…
Summary Marine Contract Services Unique combination of leading productivity and unique technologies puts PGS contract seismic in a strong market position Growth potential beyond fleet expansion Consistent and proven ability to…
Capital Markets Day Oslo, 19th December 2014 Sverre Strandenes Executive Vice President, MultiClient
MultiClient What Does the Business Unit Do MultiClient manages and licenses seismic data that PGS acquires on a non-exclusive basis. The Company invests in the projects and license the data to customers under a variety of business…
Outline The market seen from a MultiClient perspective Strengths of MultiClient within PGS: Competitive advantages Portfolio overview and key projects 2015 Summary 58
The Seismic Market Development 50 % MC share of global acquisition market in km2 MultiClient share of seismic 3D acquisition (in km2) has gradually 40 % increased to reach well above 40% at present 30 % Size and character of…
The Market Seen from a MultiClient Perspective Contract and MultiClient serve the same market, under different business models A weaker market will also affect MultiClient, but if played right it will Provide opportunities Greater…
Competitive Advantages of PGS MultiClient A Full Value Chain Seismic Service Provider Leading technology: Business models: Adding value: Local presence Vessel owner GeoStreamer Contract Interpretation Global service Global reach…
Time From Block Award to Drilling Norwegian Continental Shelf (*) 6 Average time from block award to drilling Average percentage of MC driven license awards 2010 2013 = 74% 5.0 5 4 3.4 3.5 Non-MC Years 3.2 driven 3.0…
MultiClient and GeoStreamer Makes the North Sea a Win-Win-Win Market 3.5 140 Latesales 3 Sales / Investment 120 The three wins: Sales / investment ratio 2.5 100 Government: modern database, 2 80 shortens time from award to…
Regulators Shorten Time From License Award to First Well: Kwanza MultiClient 3D Angola Operators gained approximately one year time advantage through the MultiClient business model GeoStreamer driven project PGS supplied two…
MultiClient GeoStreamer: Investing in the Future Conventional Data GeoStreamer Data 0 Hz 10 Hz 100 Hz 0 Hz 10 Hz 100 Hz Lack of low frequencies: Significantly more low frequencies: o Poor inversion quality o Improved…
2014 Barents Sea MultiClient Towed EM Program (*) Background resistivity Barents Sea MultiClient resistivity program comprising 11,700 km2 MC3D EM data (10,500 line kilometers) Total survey duration approximately 100 days using a 1…
The Equity Business Model: Azimuth Ltd Constitutes the PGS Equity Vehicle Occasionally oil companies want to exchange license acreage in return for data or services To free up capital and avoid sitting in a license, PGS divests its…
The Azimuth Global Portfolio: 6 Regional Exploration Companies AziNor Petroleum AzEire Petroleum Focus on West of Ireland North Sea Norway and UK 3 licences, 33 blocks Positions in 39 licences / 69 blocks Third party exploration…
PGS MultiClient Library 69
Countries with New PGS MultiClient Investment: 2009-14 Core MC3D areas MC2D or MegaSurvey activity only building presence for the future Large geographical spread risk diversification Vessel optimization reduced steaming…
Good MultiClient Sales Performance from all Vintages 1 000 Strong sales progress for all vintages 900 800 Moderate net book values (NBV) for surveys completed 2009- 2014 700 600 Work In Progress (WIP) spreads over 1-3…
Key MultiClient Projects 2015 10,000 km2 Fifth season MC3D in Europe MC2D in Canada Mexico 5,000 km2 MC3D in deep water Ivory Coast 10,000 km2 MC3D in Namib Basin, Angola 8,000 km2 MC3D in Great 7,000 km2 in…
Summary A full value chain seismic service provider with financial muscle Ideally positioned to take advantage of MultiClient opportunity space in a challenging market Vessel capacity 2015 at par with 2014 Investment level…
Capital Markets Day Oslo, 19th December 2014 Guillaume Cambois Executive Vice President, Imaging & Engineering
Imaging & Engineering What Does the Business Unit Do I&E has two departments: Imaging provides a full range of data processing, advanced imaging, and reservoir-related processing services to a global exploration and production…
Outline Market update Growth in Imaging revenues and market share GeoStreamer platform and benefits Complete Wavefield Imaging (CWI) Lundin case study Wintershall case study Jubarte case study Summary - 76-
Imaging & Engineering: Resilience Through a Down Market Imaging market weakening Reduction in 3D marine acquisition will lead to fewer imaging opportunities in 2015 Reprocessing market suffers from budget cuts PGS leading imaging…
Growth in Imaging External Revenue and Market Share 140 14.0% 120 12.0% Market and market share in external 100 10.0% services remained flat in 2014 USD million 80 8.0% Moderate growth in internal MultiClient 60 6.0%…
R&D Focus Leadership in Efficiency and Technology GeoStreamer Alternative sources New acquisition designs Towed EM Continuous improvement of fleet efficiency High-end imaging and automation Focus on differentiation -…
The GeoStreamer Technology Platform: Much More than Broadband Enhanced Increased illumination and efficiency and clearer earth improved model illumination GeoStreamer with Reliable GeoStreamer GeoSource Innovative Quantitative…
GeoStreamer Enables Use of All Recorded Wavefields Conventional processing only focuses on reflections Refractions and multiples are treated as noise GeoStreamer offers the opportunity to treat them as signal and improve…
Complete Wavefield Imaging (CWI) Separated Wavefield Imaging (SWIM): Uses GeoStreamer unique ability to separate up- and down-going waves Multiple reflections (down-going waves) contribute to the final image Every receiver becomes a…
CWI-Derived Shallow Model Yields Correct Reservoir Depth Imaging with conventional velocity model Imaging with CWI-derived velocity model does not give correct depth at key well location gives correct depth at key well location…
SWIM Image also Helps Identifying Shallow Hazards Conventional Image SWIM Image Resolution Shallow hazards Depth Slices 225m Illumination Shallow hazard surveys are required to ensure wells are not drilled through gas…
Brage Field Large Shallow Channel Problem Horizontal slice Inline A large and shallow channel is covering parts of the Brage field and is causing imaging challenges for the subsurface -86-
SWIM Dramatically Improves Shallow Imaging Primaries Inline Slice Cross-line SWIM Multiple reflections illuminate the near-surface more densely than primary reflections -87-
CWI Changes the Image of the Target receiver source Well location The left flank of the horst structure is partly imaged with rays going through the shallow channel CWI-derived velocity model results in a lateral…
Jubarte: Primary Image of the Water-Bottom Primaries only -89-
Jubarte: SWIM Image of the Water-Bottom SWIM -90-
Jubarte: Primary 4D Effect at Reservoir Level Time Timelapse effect lapse of water effect of Water injection injection water barely visible injection at the barely edge of survey visible at the coverage edge of survey…
Jubarte: SWIM 4D Effect at Reservoir Level Time lapse effect of water Water injection injection clearly visible due to increased coverage -92-
Imaging & Engineering: Resilience Through a Down Market 2015 Imaging market expected to decrease in line with marine 3D acquisition market PGS leading technology will provide resilience CWI workflow gaining market traction…
Capital Markets Day Oslo, 19th December 2014 Per Arild Reksnes Executive Vice President, Operations
Operations What Does the Business Unit Do Operations runs and develops PGS fleet and is committed to support Marine Contract and MultiClient with safe, reliable and efficient acquisition services 95
PGS Seismic Fleet End 2014 Ramforms Conventional Delivery 2016 Titan class Ramform Titan Ramform Atlas Ramform Hyperion PGS Apollo Ramform Tethys S class Ramform Sterling Ramform Sovereign 2D/EM/Source V class Ramform…
Tangible Improvements in HSEQ Performance 2.50 Total Recorded Case Frequency Focus on: 1.94 2.00 TRCF per million man hours HSEQ as a Line Management 1.50 1.44 responsibility at all levels 0.94 1.00 0.66 0.71 HSEQ…
Maintaining Industry Leading Performance 10.0 % Total downtime 9.0 % Focus on better planning and 8.0 % incident prevention rather than fire 7.0 % 6.0 % fighting 5.0 % 4.0 % Continuous effort on reducing 3.0 % unproductive time…
Fleet Strategy Goal Industry leading fleet cost-efficiency Renewal strategy Building flexible high capacity 3D vessels to meet customers future requirements for seismic data and securing long vessel lives Retiring capacity when it…
In 2016 PGS Will Be Number 1 in Streamer Capacity 3% 12 % 28 % 12 % 19 % 26 % PGS Company A Company B Company C Company D Other Predicted PGS share of acquisition capacity in 2016 based upon number of streamers…
Ramform Titan The Ultimate Platform for GeoStreamer Acquisition Vessel stability enabling increased productivity Spacious back decks for safe and fast recovery/deployment Towing systems enabling high streamer counts and deep…
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