q2 2019 earnings release

Kristian Johansen Sven Børre Larsen

CEO CFO

Oslo, 25 July 2019

Q2 2019 Earnings Release

Forward-Looking Statements

2

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 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 products 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.

©2018 TGS-NOPEC Geophysical Company ASA. All rights reserved

Q2 19 Highlights – Positive sales momentum

• Q2 2019 net revenues of 166 MUSD, compared to 158 MUSD in Q2 2018

• Late sales substantially up from Q1 19 and in line with Q2 18 despite lower transfer fees

• Pre-funding increased substantially

• Solid cash balance of 354 MUSD at 30 June 2019 in addition to undrawn 100 MUSD Revolving Credit Facility

• Increased distribution to shareholders

• Quarterly dividend maintained at USD 0.27 per share, up 35% from Q2 2018

• Introduction of USD 50 million share buy-back program

• Continued positive development in order backlog

• Market outlook continues to improve, but volatility still high

• Acquisition of Spectrum approved – on track for closing in mid-August 2019

©2018 TGS-NOPEC Geophysical Company ASA. All rights reserved 3

Operational highlights


Q2 2019 Operations

Western Hemisphere Eastern Hemisphere

BGP Prospector JV

HYSY 720 JV

M/V Gyre

Fugro Searcher

Amazon Warrior

Ramform Atlas JV

MagseisFairfield crew JV

Polar Duchess

Axxis crew JV

Ramform Titan JV

Sanco Atlantic

Q2 Activity

• Brazil Southern Basins SeaSeep: >210,000 km2

multibeam and coring project in Campos and Santos

basins

• Santos Basin 3D: 15,000 km2 multi-client 3D in the

southern Santos Basin, in collaboration with Spectrum

• Campos Basin 3D: 11,200 km2 multi-client 3D in the

Campos Basin in Brazil

Brazil Market

• License round transparency – calendar out to 2021

• Seismic permitting process becoming more

streamlined

• Supermajor focus area leading to competitive bidding

Q2 Activity – Brazil

6©2018 TGS-NOPEC Geophysical Company ASA. All rights reserved

New Projects

• Jeanne d’Arc 3D: 5,000 km2 multi-client 3D in

Newfoundland, in collaboration with PGS

• Torngat 3D: 3,287 km2 multi-client 3D in Labrador, in

collaboration with PGS

• North Tablelands 3D: 4,600 km2 multi-client 3D in

Newfoundland, in collaboration with PGS

• Southeast Grand Banks 2019 2D: 10,900 km multi-client

2D in SE Grand Banks, in collaboration with PGS

• NE Newfoundland Slope 2019 2D: 1,800 km multi-client

2D in Newfoundland, in collaboration with PGS

East Canada Market

• Scheduled Land Tenure system

• Stable and attractive fiscal regime promotes exploration

• High prospectivity in frontier geography

• E&P focus area

Q2 Activity – East Canada


Q2 Activity

• Amendment Phase 1: 2,758 km2 multi-client

ocean-bottom node project, in collaboration with

WesternGeco

• Acquisition expected to be completed on

schedule in mid-August

• Largest deepwater node survey in the GOM

U.S Gulf of Mexico Market

• License rounds in March and August

• Acreage turnover and farm-ins

• Sparse node surveys to deliver a new generation

of exploration data

Q2 Activity – U.S. Gulf of Mexico


Q2 Activity – North West Africa


Q2 Activity

• MSGBC SeaSeep: 113,500 km2 multi-client regional

SeaSeep project on the North West African Atlantic

Margin

• Jaan 3D: 28,300 km2 multi-client 3D project in the

southern portion of the MSGBC Basin in partnership

with PGS and GeoPartners

• 11,135 km2 new acquisition, complemented by

reprocessing and full pre-stack merging of

existing multi-client 3D

NW Africa Market

• Increasing licensing round activity

• Growing interest from super-majors

Q2 Activity

• Utsira: 1,600 km2 multi-client node project in the

Norwegian North Sea, in collaboration with Axxis

Geo Solutions

New Project

• Atlantic Margin 2019 3D: 7,000 km2 multi-client

3D project in the Norwegian Sea

Norway

• Annual APA rounds

• Acreage turnover and farm-ins

• Small and mid-size companies becoming

increasingly important

Q2 Activity – Norway


Financials

Implementation of IFRS 15

• The accounting standard IFRS 15 regarding revenue recognition implemented from 1 January 2018

• Implications for TGS

• Recognition of revenues related to Multi-client projects postponed until projects are delivered to customers

• No amortization until completion of the project

• No impact on sales from the library of completed surveys

• Internal reporting

• TGS will continue to use the previous Percentage-of-Completion-method for internal segment and management reporting (referred to as Segment Reporting)

• Provides the best picture of the performance and value creation of the business

• External reporting

• Two sets of accounts: Segment Reporting and IFRS Reporting

• Main focus in external communication will be on Segment Reporting


Net RevenuesSegment Reporting


79 79

143115

136106

152

91

134

-1% Y/Y

0

20

40

60

80

100

120

140

160

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

MU

SD

Late sales

27

62

1118 21

33 34

1428

+36% Y/Y

0

10

20

30

40

50

60

70

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

MU

SD

Pre-funding revenues

1.8 1.31.9 2.3

1.52.0

2.6

5.04.3

+190% Y/Y

0

1

2

3

4

5

6

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

MU

SD

Proprietary revenues

108142 157

135158

141

188158 166

+5% Y/Y

0

20

40

60

80

100

120

140

160

180

200

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

MU

SD

Total revenues

Net Revenues BreakdownSegment Reporting


72%

12%

8%

5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

By Business Unit

NSA EUR AMEAP GPS

86%

9%

5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

By Technology

3D 2D GPS

Operating Expenses, EBIT, Free Cash FlowSegment Reporting


1. Personnel costs and other operating expenses excluding restructuring charges and larger

impairments of operating items

2. Earnings before interest and taxes excludng restructuring charges and larger impairments

of operating items

3. Cash flow from operations minus operational investments in multi-client projects

18 1925 23 25

21

31

2125

0% Y/Y

0

5

10

15

20

25

30

35

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

MU

SD

Operating costs1

69

9577 84

7493 86

66

93

+26% Y/Y

0

10

20

30

40

50

60

70

80

90

100

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

MU

SD

Amortization and impairments

1726

53

26

56

24

69

17

44

26%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

10

20

30

40

50

60

70

80

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

MU

SD

EBIT2

EBIT - LHS Margin - RHS

12-19

56 71 55

10-18

147

8

-40

-20

0

20

40

60

80

100

120

140

160

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

MU

SD

Free Cash Flow3

Amortization

• Amortization increased to USD 93 million in Q2 from USD 66 million in Q1

• Entire increase attributable to higher sales of work-in-progress (WIP) projects

• Higher pre-funding revenues (USD 28 million vs USD 14 million)

• Higher sales from commenced but unfinished projects (USD 59 million vs USD 15 million)

• Straight-line amortization stable at approximately USD 50 million per quarter

©TGS-NOPEC Geophysical Company ASA. All rights reserved 16

0

10

20

30

40

50

60

70

80

90

100

Q1 Q2

MU

SD

Amortization

Straight line (vintage) Sales-based (WIP)

0

20

40

60

80

100

120

140

160

180

Q1 Q2

MU

SD

Multi-client revenues

Sales from completed projects (vintage) Sales from unfinished projects (WIP)

Multi-client LibrarySegment Reporting


59

114

28 3156

100

6337

87

32%

0%

10%

20%

30%

40%

50%

60%

70%

0

20

40

60

80

100

120

140

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

MU

SD

Operational investments and pre-funding ratio

Operational investments - LHS Prefunding ratio - RHS

812 838 799 750 736 750 726 698 699

0

100

200

300

400

500

600

700

800

900

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

MU

SD

NBV multi-client library

609

427

254

457

204

378

1% 3%19%

39%

56%

58%

0

100

200

300

400

500

600

700

2014 2015 2016 2017 2018 WIP

MU

SD

Investments and NBV by year of completion

Total investments NBV %

20%

1% 2% 1%

13%

7%

57%

5%1% 2%

8%

29%

19%

36%

0%

10%

20%

30%

40%

50%

60%

Pre-2014 2014 2015 2016 2017 2018 WIP

Net revenues and NBV by year of completion

% of net revenues % of NBV

Income StatementSegment Reporting


(MUSD) Q2 2019 Q2 2018 Change

Net operating revenues 166.4 157.8 5%

Cost of goods sold -0.1 0.1 -174%

Personnel cost 17.2 18.4 -7%

Other operational costs 8.2 9.2 -10%

Costs related to Spectrum trasaction 1.0 0.0 n/a

EBITDA 84% 140.0 130.2 8%

Amortization of multi-client library 92.9 73.7 26%

Depreciation 4.3 2.2 93%

Operating result 26% 42.9 54.2 -21%

Net financial items -0.2 1.6 -112%

Result before taxes 26% 42.7 55.9 -24%

Tax cost 46% 19.5 9.6 103%

Net income 14% 23.2 46.3 -50%

EPS (USD) 0.23 0.45 -50%

EPS fully diluted (USD) 0.22 0.45 -50%

Balance SheetSegment Reporting


(MUSD) Q2 2019 Q2 2018 Change Q4 2017

Goodwill 67.9 67.9 0% 31.5

Multi-client library 698.7 735.8 -5% 456.5

Deferred tax asset 0.0 2.2 -98% 15.3

Other non-current assets 64.0 27.8 131% -499.4

Total non-current assets 830.6 833.7 0% 4.0

Cash and cash equivalents 354.3 337.5 5% 0.7

Other current assets 381.5 264.5 44% -0.7

Total current assets 735.8 602.0 22% 0.0

TOTAL ASSETS 1,566.4 1,435.7 9% 4.0

Total equity 1,237.8 1,225.7 1% 1,054.3

Deferred taxes 58.1 18.2 220% 2.8

Non-current liabilities 23.8 4.9 387% -2.8

Total non-current liabilities 81.9 23.1 255% 0.0

Taxes payable, withheld payroll tax, social security 18.2 45.9 -60% 0.0

Other current liabilities 228.5 141.1 62% 68.4

Total current liabilities 246.7 187.0 32% 68.4

TOTAL EQUITY AND LIABILITIES 1,566.4 1,435.7 9% 1,122.6

Cash Flow Statement



Received payments 100.0 163.4 -39%

Payments for operational expenses -32.0 -29.5 9%

Paid taxes -8.4 -6.1 37%

Net cash flow from operating activities 59.7 127.8 -53%

Investment in tangible fixed assets -4.7 -1.0 357%

Investments in multi-client library -51.2 -73.3 -30%

Investments through mergers and acquisitions 0.0 0.0 n/a

Interest income 2.0 1.2 67%

Net Cash Flow from investing activities -53.9 -73.1 -26%

Net change in loans 0.0 0.0 n/a

Interest expense -0.7 -0.3 138%

Payment of dividends -25.3 -22.0 15%

Purchase of own shares -15.8 0.0 n/a

Paid in equity 0.3 3.2 -92%

Net cash flow from financing activities -41.5 -19.0 118%

Net unrealized currency gains/(losses) 0.0 0.2 -87%

Net change in cash and cash equivalents -35.7 35.8 -200%

Dividends

• Quarterly dividend of USD 0.27 per share to be paid in Q2 2019

• Ex-date 1 August 2019

• Payment date 15 August 2019

• Introduction of share re-purchase program

• Up to USD 50 million to be repurchased before AGM in May 2020

• 600,000 shares bought back in Q2 19 at an average price of NOK 228.65 per share – USD 16 million in total


1. Quarterly dividends defined in USD from 2016. Annual dividends defined in NOK prior to

2016 – converted to USD with the FX rate at the ex-dividend dates

2. Yield based on share price at date of announcing the dividend. From 2016-18 yield is

calulated using the average of the quarterly payments

0.27

0.27

0.27NOK 4.0

NOK 5.0NOK 6.0

NOK 8.0NOK 8.5

NOK 8.5

USD 0.6USD 0.6

USD 0.8

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

US

D p

er

share

Year of payment

Dividend per share1

3.5 % 3.6 %4.0 % 3.9 %

4.9 %5.2 %

3.7 %

2.8 % 2.6 %

3.9 %

0.0 %

1.0 %

2.0 %

3.0 %

4.0 %

5.0 %

6.0 %

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Year of payment

Dividend yield2

Outlook

Market continues to improve – but volatility still high


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1

12

Q2

12

Q3

12

Q4

12

Q1

13

Q2

13

Q3

13

Q4

13

Q1

14

Q2

14

Q3

14

Q4

14

Q1

15

Q2

15

Q3

15

Q4

15

Q1

16

Q2

16

Q3

16

Q4

16

Q1

17

Q2

17

Q3

17

Q4

17

Q1

18

Q2

18

Q3

18

Q4

18

Q1

19

Q2

19

Aggregate multi-client revenues1

Last 12 months

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1

12

Q2

12

Q3

12

Q4

12

Q1

13

Q2

13

Q3

13

Q4

13

Q1

14

Q2

14

Q3

14

Q4

14

Q1

15

Q2

15

Q3

15

Q4

15

Q1

16

Q2

16

Q3

16

Q4

16

Q1

17

Q2

17

Q3

17

Q4

17

Q1

18

Q2

18

Q3

18

Q4

18

Q1

19

Q2

19

Y/Y change aggregate multi-client revenues

1. Includes TGS, PGS, WG, CGG, SPU, PLCS, ION. Those who have not yet reported Q2 19

revenues are included with the weighted average gowth rate of the others

Source: TGS

Pricing key to a sustained recovery


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

MU

SD

Seismic spending

-46%

77%

price

23%

volume

Source: Carnegie, TGS

• 2018 seismic spending more than USD 5 billion below 2012 level

• Of this, 77% is caused by lower prices and 23% by lower volumes

• Current prices are not sustainable for keeping a healthy industry

• Signs of improvement

• Structural change in the industry

• More consolidated supply side

• Improving vessel day rates

Backlog


242

182

145

125

103

71

51

121127

63

8274

86

103

63

112

130

0

50

100

150

200

250

300

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

MU

SD

Revenue backlog1 as per end of quarter

1. Sales committed by customers but not yet recognized in the Segment Reporting accounts

2019 project schedule


Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

* JV projects NSA EUR AMEAP

2D/S

eas

ee

p3D

Lan

d

Brazil Seaseep

MSGBC Seaseep

SE Grand Banks 2D

Jaan 3D*

Santos 3D*

Campos 3D

Amendment OBN*

North Tablelands 3D*

Torngat 3D*

Jeanne d'Arc*

Utisra OBN*

Greater Castberg 3D*

Altaltic Margin 2019

Canton 3D

Gloss Mountain 3D

South Hackberry

Railgun 3D

Status Spectrum acquisition

• Transaction approved by EGM in both companies on 21 June 2019

• All reviews by competition authorities have been completed

• On-track for closing in mid-August

• Integration planning in progress

• Estimate of annual synergy cost savings of approximately USD 20 million maintained



The industry’s most comprehensive modern database

• TGS and Spectrum have

complementary databases

• Comprehensive coverage

in all mature and frontier

basins

TGS 2D

TGS 3D

SPU 2D

SPU 3D

Building an optimal investment portfolio


North America Offshore Onshore Europe / AP South Atlantic

• Canada 3D

• US GoM OBN

• Atlantic 2D

• Lower 48

• Canada

• Latin America

• Norway OBN

• UK OBN / 3D

• AP 2D / 3D

• Brazil 3D

• W-Africa 3D / 2D

• Mexico & L-America

USD 200m

Q2 19 Summary


• Q2 2019 net revenues of 166 MUSD, compared to 158 MUSD in Q2 2018

• Solid cash balance of 354 MUSD at 30 June 2019 in addition to undrawn 100 MUSD Revolving Credit Facility

• Increasing distribution to shareholders

• Continued positive development in order backlog

• Market outlook continues to improve, but volatility still high

• Acquisition of Spectrum approved – on track for closing in mid-August 2019

Appendix

Income statementIFRS



Net operating revenues 104.8 107.8 -3%

Cost of goods sold -0.1 0.1 -174%

Personnel cost 17.2 18.4 -7%

Other operational costs 9.2 9.2 1%

EBITDA 75% 78.5 80.1 -2%

Amortization of multi-client library 69.5 47.9 45%

Depreciation 4.3 2.2 93%

Operating result 4% 4.7 30.0 -84%

Interest income 2.0 1.2 67%

Interest expense -0.7 -0.2 176%

Exchange gains/losses -1.6 0.5 -394%

Other financial income 0.0 0.3 -83%

Result before taxes 4% 4.5 31.7 -86%

Tax cost 139% 6.2 7.7 -19%

Net income -2% -1.7 24.1 -107%

EPS (USD) -0.02 0.23 -107%

EPS fully diluted (USD) -0.02 0.23 -107%

Balance sheetIFRS


(MUSD) Q2 2019 Q2 2018 Change Q4 2018

Goodwill 67.9 67.9 0% 67.9

Multi-client library 859.1 859.9 0% 870.5

Deferred tax asset 0.5 2.2 -78% 0.9

Other non-current assets 64.0 27.8 131% 31.4

Total non-current assets 991.5 957.8 4% 970.7

Cash and cash equivalents 354.3 337.5 5% 273.5

Other current assets 381.5 242.5 57% 380.2

Total current assets 735.8 580.0 27% 653.7

TOTAL ASSETS 1,727.2 1,537.8 12% 1,624.4

Total equity 1,181.9 1,131.6 4% 1,251.7

Deferred taxes 46.8 4.7 895% 29.3

Non-current liabilities 23.8 4.9 387% 5.0

Total non-current liabilities 70.6 9.6 636% 34.3

Taxes payable, withheld payroll tax, social security 18.2 42.2 -57% 27.1

Other current liabilities 456.4 354.4 29% 311.4

Total current liabilities 474.7 396.6 20% 338.4

TOTAL EQUITY AND LIABILITIES 1,727.2 1,537.8 12% 1,624.4

ReconciliationSegment reporting/IFRS


Segment IFRS

Q2 2019 Income Statement (MUSD) Reporting Diff. Reporting

Net revenues 166.4 -61.5 104.8

Amortization and impairment of multi-client library 92.9 -23.3 69.5

Total operating expenses 123.5 -23.3 100.2

Tax cost 19.5 -19.5 0.0

Net income 23.2 -18.5 4.7

Segment IFRS

Q2 2019 Balance sheet (MUSD) Reporting Diff. Reporting

Multi-client library 698.7 160.4 859.1

Total non-current assets 830.6 160.8 991.5

Other equity 1,234.3 -55.9 1,178.3

Total equity 1,237.8 -55.9 1,181.9

Non-current liabilities

Deferred taxes 58.1 -11.3 46.8

Total non-current liabilities 87.4 -28.6 58.7

Accounts payable and debt to partners 103.3 -103.3 0.0

Taxes payable, withheld payroll tax, social security 18.2 0.0 18.2

Other current liabilities 125.2 331.2 456.4

Total current liabilities 246.7 228.0 474.7

Thank you

q2 2019 earnings release

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