PGS Announces Weaker Than Expected Fourth Quarter; Realizes One-Time Gains; Takes Special Charges

Petroleum Geo-Services ASA (NYSE: PGO; OSE: PGS) announced today that the preliminary results for the fourth quarter of 2000 were weaker than expected. These results indicate that oil company spending on marine geophysical information has yet to fully recover. While the level of interest in the Company’s information database has continued to escalate, the volume of data purchased and the price per unit has yet to return to anticipated levels. The Company now expects fourth quarter seismic data library sales to remain relatively flat with the three previously reported quarters in 2000. Consequently, the Company now expects fourth quarter earnings to be significantly lower than current analyst consensus estimates of approximately $0.18 per share.

Also, as a result of the weak market conditions that have now persisted in the geophysical business for the past two years, PGS expects to record a one-time non-cash pre-tax charge of approximately $365 million to: 1) write down the remaining value of certain stacked, non-operating assets; 2) reflect impairment in the value of certain poorly performing assets; 3) completely write off a limited but select group of high cost advanced technology seismic surveys which have failed to sell in accordance with plan; and 4) provide for expected losses on certain long-term contracts.

In addition, the Company expects to realize one time pre-tax gains of approximately $230 million primarily related to the recently announced sales of its Data Management business and the recently completed sale of its ownership interest in Spinnaker Exploration Company.

PGS has also revised its 2001 earnings forecast. Based on the current business environment as well as an anticipated growth in the seismic market of approximately 15% in 2001, the Company expects to earn between $0.70 and $0.80 per share for the calendar year 2001 with roughly 70% of these earnings expected to be generated by operations in the second half of the year. The improved earnings in the second half of 2001 are expected to result from better utilization within the Company’s FPSO fleet and improving conditions within the geophysical market.

Chairman and Chief Executive Officer, Reidar Michaelsen, stated, “We are clearly disappointed that the poor market conditions which have prevailed for the past two years have prevented us from achieving full utilization and adequate returns on our assets. However, we have observed a gradual increase in business activity and expect the overall geophysical market to continue its recovery as we move into 2001. Despite the difficult business climate, we have been able to develop some interesting and valuable technologies and have been able to establish some non-core businesses and investments that have created significant value for the Company. The Company has now sold its interest in Spinnaker Exploration and its data management business and, further, intends to sell or otherwise realize value from other non-core assets during 2001. The sale of these investments in recent weeks has improved the Company’s liquidity position and allowed it to reduce outstanding debt. We remain committed to the sale of the remaining non-core assets which should allow for further debt reduction in 2001.”

The Company has scheduled a conference call on Friday, January 19, 2001 to discuss the details of today's news announcement. The call will begin at 10:00 a.m. Eastern Time, 9:00 a.m. Central Time, Friday, January 19, 2001. To access the call, please contact the conference call operator at 800/619/2425 or 712/271/3627 for international callers, 15 - 20 minutes prior to the scheduled start time, and ask for the "PGS Conference Call." A replay will be available through January 26, 2001. The number for the replay is 888/566/0512 or 402/998/0671 for international callers. The call and replay will also be webcast on www.pgs.com. PGS suggests that you connect with the site at least 15 - 20 minutes prior to the call to ensure adequate time for any software download that may be needed to hear the call.

Petroleum Geo-Services is a technologically-focused oilfield service company principally involved in two businesses: geophysical seismic services and production services. PGS acquires, processes, manages and markets 3D, time-lapse and multi-component seismic data and provides associated data management solutions. This data is used by oil and gas companies in the exploration for new reserves, the development of existing reservoirs, and the management of producing oil and gas fields. PGS’ PetroTracTM suite of advanced geophysical technologies allows oil and gas companies to better characterize and monitor their reservoirs in order to enhance production and ultimate recovery of hydrocarbons. In its production services business, PGS owns four floating production, storage and offloading systems (FPSOs) and operates numerous offshore production facilities for oil and gas companies. FPSOs permit oil and gas companies to produce from offshore fields more cost effectively. PGS operates on a worldwide basis with headquarters in Oslo, Norway and Houston, Texas.