Strong Seismic Performance
February 21, 2006: OSLO, NORWAY - Petroleum Geo-Services ASA ("PGS" or the "Company") (OSE and NYSE: PGS) announced today its unaudited fourth quarter 2005 results under U.S. GAAP.
Key figures as reported
Pro forma key figures[1] excluding Pertra
|
Quarter ended
December 31, |
Year ended
December 31, | ||
(In millions of dollars) |
2005
Unaudited |
2004
Unaudited |
2005
Unaudited |
2004
Unaudited |
Revenues |
$ 340.3 |
$ 296.4 |
$ 1,170.1 |
$ 1,017.5 |
Operating profit (loss)/EBIT |
39.1 |
(36.9) |
185.4 |
9.5 |
Adjusted EBITDA (as defined) |
$ 134.2 |
$ 95.0 |
$ 416.4 |
$ 347.0 |
Svein Rennemo, PGS Chief Executive Officer, commented:
"PGS fourth quarter results reflect the strong upward trend in world-wide E&P activity and spending, and the continued motivation and drive from competent employees throughout PGS. We see an unparalleled strength both in Marine Geophysical contract and multi-client demand continuing in 2006.
Our average EBIT margin for towed streamer contract work was well above 25 percent for the quarter, and multi-client late sales were ahead of previous expectation. For 2006, we expect average PGS EBIT margins for streamer contract work to improve further to above 30 percent, more than 10 percentage points higher than 2005. We also expect a further rise in highly pre-funded new multi-client activity.
Our Onshore operations have successfully entered the North African market with contracts for a total of three crews in Libya. Front-end mobilization and start-up costs on these contracts, as well as on the Nigerian shallow water project that commenced in October, continued to negatively affect Onshore results in fourth quarter. Despite this, the fourth quarter shows significant improvement and results are expected to increase substantially in 2006.
Results in our Production segment improved in the fourth quarter, but the improvement was less than our forecast, primarily due to lower than expected production on the Varg field. We continue to see a high operational uptime and regularity, easing the negative impact of a higher ongoing level of costs for maintenance and repairs. We expect that the market for floating production services will be strong and offer good growth and redeployment opportunities in the years to come.
Our completion of a successful refinancing in December and our strong cash flow provides substantial flexibility and capacity to grow and pursue value enhancing structural moves.
We have made significant progress in the evaluation of a separation of our Geophysical and Production businesses. Currently, we believe a combined de-merger and share offering will be the most effective way to achieve separation. We expect to be able to present further information on the plan for the implementation of thereof around the end of the first quarter."
Q4 Highlights
o Repurchased substantially all of the $746 million 10% Senior Notes due 2010 as well as the remaining $75 million of the $250 million 8% Senior Notes due 2006
o Successfully raised $1 billion senior secured credit facility consisting of a seven-year $850 million term loan and a five-year $150 million revolving credit facility, which replaced the previous $110 million secured credit facility
Marine Geophysical
Onshore
Production
Outlook 2006
Marine Geophysical
Onshore
Production
Petrojarl Varg production contract
Talisman and PGS entered in February 2005 into an option agreement enabling Talisman to change the termination clause in the contract between production license 038 ("PL038") and PGS Production. If exercised, the PL038 license holders would have had the right to use Petrojarl Varg for production of the Varg field until 2010, and would also have been obligated to pay PGS a fixed option fee of $22.5 million and further guarantee a minimum rate of $190,000 per day as compensation for the use of Petrojarl Varg. The option expired February 1, 2006 without being exercised.
Petrojarl Varg will therefore continue to produce the Talisman operated Varg field for a fixed base day rate of $90,000 and a variable rate of $6.30 per barrel produced. PGS is, according to certain criteria, entitled to terminate the agreement if the production of the Varg field falls below 15,700 barrels per day. Based on the current production profile of the Varg field, Petrojarl Varg could become available for redeployment on a new field in 2008.
PGS sees potential upside in the accelerated redeployment opportunity arising from this event in terms of contract terms and capacity utilization. Petrojarl Varg is currently producing approximately 25,000 barrels per day, but has capacity to produce 57,000 barrels per day. The vessel is adaptable for most offshore environments both within the North Sea Basin and in other international markets. PGS Production has identified opportunities for potential redeployment and has started actively marketing the vessel both inside and outside the North Sea Basin.
Contingent proceeds from sale of Pertra
As a part of the agreement with Talisman relating to the sale of the Company's oil and natural gas subsidiary Pertra in 2004, PGS is entitled to an additional sales consideration equal to the value, on a post petroleum tax basis, of 50% of the relevant revenues from the Varg field in excess of $240 million for each of the years 2005 and 2006. The 2005 portion of the contingent consideration, which amounted to $8.1 million, was received in January 2006 and recognized as gain from sale of subsidiary in Q4 2005.
Purchase of shuttle tanker for targeted PFSO conversion projects
In January 2006 the Company entered into an agreement to purchase the shuttle tanker MT Rita Knutsen for $35 million. PGS Production has developed plans for a conversion of the ship to an FPSO. The vessel is considered as a possible FPSO solution for several upcoming projects, and a conversion will begin when a firm contract for the ship is secured in the market. Rita Knutsen is a double hull vessel of 124.472 dwt, built by the Daewoo shipyard in Korea in 1986 and will be operated by Knutsen OAS Shipping on a bareboat charter agreement until a decision to start conversion is made.
[1] Pro forma key figures as presented in the table show revenues, operating profit (loss) and Adjusted EBITDA as if Pertra had not been part of the consolidated PGS group of companies for any of the periods presented. Pertra was sold March 1, 2005.
The full report can be downloaded from the following link: