Financial Highlights
- First quarter revenue increases by 43% over the prior year despite a significant reduction in seismic capacity
- First quarter diluted earnings per share were $0.06
- Production services revenue totals $111.0 million, 52% of total revenue, for the first quarter
- First quarter multi-client sales increase by 54% over the prior year period
- PGS issues $225 million of floating rate senior unsecured notes in March. Net proceeds were used to repay bank debt and to enhance liquidity
Operating Highlights
- PGS is awarded the largest seafloor multi-component contract in the industry after various field tests were performed in direct competition with other contractors
- PGS is awarded an early well test contract in the North Sea for the Petrojarl I. Production is expected to commence during the second quarter
- PGS is awarded one of the industry’s largest land contracts in the Middle East
- PGS is awarded a five year, approximately $240 million, contract extension covering the operation of Kerr McGee’s North Sea facilities
- Seismic fleet backlog continues to strengthen
Houston, Texas; Oslo, Norway; April 28, 2000: — Petroleum Geo-Services ASA (NYSE: PGO; OSE: PGS) reported improved 2000 first quarter earnings, reflecting higher revenue from multi-client sales and the production services group as compared to the same period of 1999. With oil and gas companies cautiously optimistic about the stability of hydrocarbon prices, the geophysical market began a slow recovery from the depressed activity levels of 1999. Additionally, the acquisition of the Petrojarl Varg in July 1999, together with improved production from the Ramform Banff, which began production on January 31, 1999, positively impacted results for the first quarter as compared to the same period of 1999.
The Company's 2000 first quarter revenue of $212.7 million represents a 43% increase over the same period of the previous year. First quarter operating profit was $27.1 million, representing a 13% operating profit margin.
The Company’s net income for the first quarter of 2000 was $6.7 million, an increase of $5.2 million over net income (before unusual items and accounting change) for the 1999 first quarter. Diluted earnings per share were $0.06 compared to diluted earnings per share (before unusual items and accounting change) of $0.02 for the same period of 1999.
Reidar Michaelsen, Chairman of the Board and Chief Executive Officer, stated, “Our first quarter results reflect the slowly improving climate for oilfield services and geophysical services in particular. With North Sea Brent crude oil prices settling into a range of $20 to $25 per barrel and based upon customer inquiries, we expect to see renewed demand for seismic data and a revived seismic contract market starting in the third quarter of 2000. Our production services operations continue to improve, particularly with the resolution of many of the operational problems that effected the Ramform Banff FPSO during the 1999 fourth quarter and the early part of 2000. Additionally, the completion of the Norwegian 16th licensing round, which covered many blocks where we have multi-client seismic data, should result in continued improvement in our geophysical results.”
Michaelsen went on to say, “With respect to multi-client data, our library cash investment for the first quarter was $72 million, and we remain on target to generate positive cash flow from the library for 2000. While we believe 1999 may have been the most difficult year on record for the seismic industry, the worst seems to be behind us and our market position has improved as a result of capacity reductions within the industry and improving market conditions.”
Review of Geophysical Services Operations
For the quarter ended March 31, 2000, the Company achieved total geophysical services revenue of $101.7 million, of which $56.3 million represented multi-client sales, yielding an operating profit of $6.4 million. The average amortization rate applied to multi-client sales during the first quarter was 57%.
The improvement in geophysical services revenue reflects the early stages of a recovery in demand for oilfield services. Oil and gas companies are increasing exploration and development spending due to a more stable hydrocarbon price environment resulting from renewed discipline on the part of oil producing nations and increasing worldwide demand for oil. Additionally, as the pace of consolidation within the oil and gas industry has slowed, oil and gas companies have begun to focus on developing new fields and prospects, particularly in the highly prospective areas of Brazil, mid-Norway, deepwater Gulf of Mexico and West Africa.
During the first quarter, we continued to acquire data under our Brazilian multi-client programs and have achieved excellent interest in this data, with prefunding levels in excess of 50%. Additionally, the Norwegian 16th licensing round, completed in April 2000, included a substantial number of blocks covered by the Company’s multi-client data library. The award of these blocks should generate increased interest in the Company’s data library during 2000. With respect to Nigeria, our deepwater multi-client data program should benefit from the pending bid round scheduled for the latter half of 2000, with the award of the deepwater blocks expected shortly thereafter.
Overall, at March 31, 2000, the Company had $333 million of in-process seismic data and $537 million of finished seismic data available for sale. All of the seismic data is 3D or multi-component geophysical information and approximately 80% of this data has been acquired in the last 24 months. Most of the Company's seismic data is located in deepwater areas in the Gulf of Mexico, West Africa, Brazil, Norway, West of Shetlands, Egypt and Australia. In addition, the Company maintains a sizeable database in the gas prone areas on the continental shelves in the Gulf of Mexico, the UK sector of the North Sea, Norway, Indonesia and certain areas in the Middle East. The Company believes its current data library is one of the largest and newest 3D seismic databases available in the industry.
Review of Production Services Operations
For the quarter ended March 31, 2000, the Company achieved production services revenue of $111.0 million, a 46% increase as compared to the same period of the prior year, yielding an operating profit of $20.7 million. Revenue from the Petrojarl Varg, acquired in July 1999, as well as higher revenue from the Ramform Banff, positively affected revenue for the first quarter of 2000. The Company continues to make improvements in the operational performance and uptime of the Ramform Banff. In addition to the Kyle field, we also continue to pursue a number of other fields in the vicinity of the Ramform Banff that are candidates for production through this facility.
During the first quarter, the Petrojarl I was awarded a new contract to perform an early well test on the Kyle field that is expected to commence in May 2000, and continue through October 2000. Upon completion of the Kyle field early well test, the vessel will undergo a standard five-year inspection and a minor upgrade that should allow certification for an additional fifteen years of operation in the North Sea. Following the certification and upgrade, the Petrojarl I is expected to work on a multi-year contract, several of which are currently under discussion. In April 2000, PGS was awarded a five year, approximately $240 million, contract extension covering field operations support services to Kerr McGee’s fixed installation and floating production facilities located in the North Sea. The fully incentivized contract, an expansion of our existing relationship with Kerr McGee, reconfirms our leading position as the preferred provider of operation management services in the North Sea.
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