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TGS – Q1 update

13 April 2015OSE

ASKER, NORWAY (13 April 2015) - Today, TGS announced a Cost Reduction Program reflecting the deterioration of the market for seismic data seen in the first quarter of 2015.  Based on preliminary reporting from operating units, TGS management now expects net revenues for the first quarter of 2015 to be approximately USD 172 million, about 23% lower than revenues reported for the first quarter of 2014. 

Net revenues were lower than management`s expectations due to weaker late sales from the data library in all geographic regions.  Demand for seismic data has significantly deteriorated over the first three months of 2015 and the outlook for improvement in the market remains quite uncertain. TGS is in constant communication with its customers and many of those energy companies have not finalized their spending plans for 2015.  From these discussions and an assumption that the price of oil will remain under pressure, TGS expects annual net revenues of approximately USD 630 million for 2015, down from USD 750 million as originally communicated in January. Operating profit (EBIT) is expected to be negatively affected by the lower revenues, however higher amortization will be partly compensated by the effects of the Cost Reduction Program.  

The Cost Reduction Program will position the company for the more challenging seismic market caused by the significant drop in oil price. A key element of this program is a reduction of more than 10% of TGS' global workforce effective from April. Restructuring charges of approximately USD 4 million will be booked in Q2 as a result of this Program. The company expects annual cost savings of approximately USD 10 million as a result of the Cost Reduction Program.  In addition to the reduction in headcount, Management has taken concrete actions to recognize additional operational cost savings from the original 2015 budget.  Management will continue to review the Company's cost structure and if necessary, take additional action to reduce cost if the market continues to deteriorate.

Cash flow was strong in Q1 as cash holdings increased from USD 256 million at year-end 2014 to USD 352 million as of 31 March 2015. In addition, the company has an undrawn credit facility of USD 50 million resulting in a total liquidity reserve of USD 402 million. The strong balance sheet and liquidity position continue to provide dividend support going forward. The Board of Directors has reviewed the Company's financial situation, including the Company's distributable reserves according to the annual accounts for 2014. On this basis and in accordance with the Company's resolved dividend policy, the Board of Directors wishes to be authorized to distribute quarterly dividend payments from Q1 2016. Reference is made to the Notice to the Annual General Meeting published this morning for more information on the quarterly dividend proposal.

The full first quarter earnings release is scheduled for 23 April 2015.  A conference call will be held the same day in association with that release.

 



TGS provides multi-client geoscience data to oil and gas Exploration and Production companies worldwide. In addition to extensive global geophysical and geological data libraries that include multi-client seismic data, magnetic and gravity data, digital well logs, production data and directional surveys, TGS also offers advanced processing and imaging services, interpretation products, and data integration solutions.

All statements in this press release 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 product 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.



Kristian Johansen
Chief Executive Officer
Tel: +1 832-667-4795

Will Ashby
Vice President HR & Communication
Tel: +1 713 860 2184