OSLO, Norway, July 27, 2006 (PRIMEZONE) -- Petroleum Geo-Services ASA ("PGS" or the "Company") (OSE and NYSE: PGS) announced today its unaudited second quarter 2006 results under U.S. GAAP.
-- Petrojarl demerger and offering completed and PGS is once more a
dedicated geophysical company: The demerger and offering of
Petrojarl (PGS's former Production segment) was successfully
completed June 29. Following the separation PGS is once more a
dedicated geophysical company. All financial information relating
to the Production segment is reported separately as discontinued
operations
-- Earnings momentum maintained: Operating profit of $89.8 million,
up $45.2 million compared to Q2 2005
-- Continued strong Marine performance: Strong operating profit
despite lower vessel efficiency in April/May and increasing
deployment of vessels for multi-client acquisition
-- Onshore delivers healthy results: Operating profit of $7.3 million,
up $13.6 million compared to Q2 2005 as a result of improved
contract earnings and strong multi-client late sales
-- Significant debt reduction achieved: Debt repayment of $309
million in Q2 2006 with further repayment of $120 million in July
2006
At the time of this earnings release the Company has identified and is still researching an uncertainty relating to the application of U.S. GAAP relating to fresh start reporting for deferred tax assets in connection with intra-group transfers of assets in preparation for the Petrojarl demerger. The Company has based its financial reporting on a position, which the Company believes is consistent with the economic realities. If, when the uncertainty is finally resolved, the Company were to change its financial reporting position, the Company believes that the most likely result would be to reduce the book value of the Company's multi-client library by approximately $60 million, with a corresponding reduction of shareholders' equity (reference is made to separate description in the paragraph "Income Tax Expense"), with no effect on taxes payable.
Key figures 1
Quarter ended Six months ended Year ended
(In millions of June 30, June 30, Dec. 31,
dollars except 2006 2005 2006 2005 2005
per share data) Unaudited Unaudited Unaudited Unaudited Unaudited
Revenues (excludes
discontinued
operations $ 310.4 $ 222.9 $ 621.4 $ 412.6 $ 888.0
Operating profit/
EBIT (excludes
discontinued
operations) 89.8 44.6 197.3 68.5 130.2
Income before income
tax expense and
minority interest
(excludes
discontinued
operations) 75.7 20.1 166.3 23.2 (68.6)
Net income
(includes
discontinued
operations) 42.0 23.7 112.3 179.2 112.6
Earnings per share
($ per share)
(includes
discontinued
operations) 0.70 0.40 1.87 2.99 1.88
Adjusted EBITDA (as
defined) (includes
discontinued
operations) 143.0 83.2 279.7 141.5 324.4
Net cash provided
by operating
activities 115.8 23.2 188.4 96.8 279.1
Cash investment in
multi-client 21.3 21.0 31.3 30.8 55.7
Capital expenditures 37.8 21.9 57.3 37.0 90.4
Total assets (period
end) 1,200.7 1,716.4 1,200.7 1,716.4 1,717.6
Cash and cash
equivalents
(period end) 140.5 107.6 140.5 107.6 121.5
Net interest
bearing debt
(period end) $ 488.5 $ 820.0 $ 488.5 $ 820.0 $ 828.7
(a) Following the completion of the de-merger and public offering of
Petrojarl on June 29, 2006, the Key figures reflects, for all
periods presented, a presentation of the operations of the
Production segment and the gain from sale of Petrojarl shares, as
discontinued operations.
Svein Rennemo, PGS Chief Executive Officer, commented:
"Following the successful demerger and listing of our Production business as Petrojarl, PGS is once more a focused and dedicated geophysical services company. We have the financial strength, the competence and technologies to develop and grow our business substantially in the years ahead.
"In the second Quarter we saw a further strengthening in pricing and contractual terms for our Marine contract business and strong late sales both for our Marine and Onshore businesses. The EBIT margin on marine contract acquisition doubled from the second quarter last year, but saw a decline from the preceding quarter as temporarily lower vessel efficiency in April/May, following the very strong first quarter performance, impacted margins. For the full year we expect Marine contract EBIT margins around 40 percent, as previously guided.
"The continued trend of improved demand and prices for seismic services confirm and strengthen our expectations of strong earnings through 2007. Bidding and awards activity for the 2007 North Sea season has already started. Based on this activity so far, we expect North Sea prices and margins in 2007 to exceed 2006. Moving forward, managing cost inflation, now widespread in the oil industry, through continued strong focus on efficiency and productivity in all parts of the business remains a top priority."
Q2 Highlights
PGS group
-- Revenues of $310.4 million, up $87.5 million (39%) from Q2 2005,
driven by a sharp increase in contract revenues both Marine and
Onshore
-- Operating profit of $89.8 million, up $45.2 million (101%) from Q2
2005
-- Income before income tax expense and minority interest of $75.7
million compared to $20.1 million in Q2 2005
-- Net income of $42.0 million, compared to $23.7 million in Q2 2005
-- Cash flow from operations of $115.8 million, up $92.6 million from
Q2 2005. In Q2 2006 the temporary increase in working capital,
caused primarily by increased receivables on certain large
projects, did not reverse as expected since project billing
milestones were reached too late to benefit this quarter
-- Net interest bearing debt of $489 million at June 30, 2006, down
$320 million in Q2, primarily driven by the $270 million net
effect of the demerger of Petrojarl. Proceeds from sale of 10% of
the outstanding shares in Petrojarl, $47.3 million, were received
subsequent to quarter end
Marine
-- Total revenues of $248.7 million, up $58.2 million (31%) from Q2
2005
-- Contract acquisition revenues of $147.7 million, up $53.5 million
(57%) from Q2 2005
-- Operating margin for marine contract seismic around 35%,
approximately doubled from Q2 2005. Main reason for the reduction
from the Q1 2006 level is lower acquisition productivity on some
projects
-- Multi-client revenues of $90.5 million, up $5.5 million (7%) from
Q2 2005
-- Operating profit of $87.1 million, up $28.9 million (50%) from Q2
2005
-- Order backlog at June 30, 2006 of $405 million compared to $180
million at June 30, 2005 and $396 million at March 31, 2006
Onshore
-- Revenues of $62.2 million, up $33.8 million (119%) from Q2 2005
-- Operating profit of $7.3 million compared to a loss of $6.3
million in Q2 2005
-- Performance improvement driven by strong contract and multi-client
performance in North America and on three acquisition crews in
North Africa which more than offset low productivity in Nigeria
-- Order backlog at June 30, 2006 of $140 million compared to $93
million at June 30, 2005 and $155 million at March 31, 2006
Outlook 2006
Marine
-- Full year streamer contract EBIT margins are expected to be around
40%
-- The Company plans to use more of its capacity to acquire
multi-client data in the second half of 2006, causing contract
revenues to decrease and multi-client pre-funding revenues to
increase compared to the first half. The current vessel schedule
would result in approximately 21% of full year active streamer
time in multi-client acquisition and approximately 79% in contract
-- Multi-client late sales expected to be somewhat lower than 2005 as
a result of low level of investment over recent years. Forecasting
multi-client late sales for individual periods involves a high
degree of uncertainty as a result of the nature of the business
-- Cash investments in multi-client library expected to approximately
double from an investment of $46 million in 2005, with pre-funding
levels significantly higher than 2005
-- Planned capital expenditures of approximately $150-160 million,
primarily related to streamer expansion and replacement program and
the project to build a new and enhanced Ramform vessel for delivery
early 2008
Onshore
-- Revenues and operating profit expected to be significantly above
2005 levels
-- Cash investments in multi-client library expected to more than
double from an investment of $8 million in 2005
-- Planned capital expenditures of approximately $10-15 million
Demerger and IPO of Petrojarl
The demerger and IPO of Petrojarl (formerly the Production segment) was successfully completed on June 29, 2006. In the transaction, PGS shareholders received a distribution of approximately 80% of the shares in Petrojarl ASA while in total approximately 20% of the shares were offered in a public offering.
The offering of Petrojarl shares was divided into a firm sale from the Company of 7,499,995 shares (10%) and an over-allotment of 7,499,995 shares (10%), with the latter shares being lent from the Company to the managers of the offering to cover the over-allotment. These additional shares were also made subject to an over-allotment option ("greenshoe") granted by the Company to the managers as part of the establishing of a stabilization mechanism for the offering, such option giving the managers the right to acquire such shares from the Company at the offer price. Thus, in total 14,999,990 (20%) of the outstanding shares in Petrojarl were allocated to subscribers June 29, 2006, at a price of NOK 43 per share.
As a part of the stabilization mechanism, the managers may purchase shares of Petrojarl in the market for a period of up to 30 days after the IPO. If stabilization purchases (to the extent they exceed any sales in the stabilization period) have been made, this will lead the managers to exercise less of the over-allotment option, and consequently, the Company may after the IPO continue as a shareholder in Petrojarl with a shareholding of up to 10% of outstanding Petrojarl shares. Due to the characteristics of the transaction, under U.S. GAAP, the transaction has been accounted for as a sale of 10% of outstanding Petrojarl shares in Q2, with all costs relating to the sale charged to expense in Q2, while the gain on any additional shares sold under the over-allotment option described above will be recognized in Q3. The Company has been informed that, as of July 26, 2006, a net of approximately 6,500,000 shares have been bought by the managers.
Following the separation, PGS is once more a dedicated geophysical company and all historical financial information relating to the Production segment, including the effects of the sale of shares, is reported as discontinued operations.
In Q2, $3.4 million is reported as income from discontinued operations relating to Petrojarl. The amount includes $0.5 million of pretax income of Petrojarl, a $9.7 million gain from the sale of 10% of the outstanding shares in Petrojarl (net of the full $7.4 of offering costs) and $6.9 million in demerger costs. All fees and costs incurred in Q2 directly relating to the demerger and IPO are included in the above numbers.
The full report can be downloaded from the following link: http://hugin.info/115/R/1065997/179844.pdf