Petroleum Geo-Services Announces
Third Quarter 2000 Results
Financial Highlights
Third quarter revenue increases by 4% over the 2000 second quarter
Third quarter diluted earnings per share were $0.17, an increase of 21% over the 2000 second quarter
Production services revenue totals $124.8 million, 51% of total revenue, for the third quarter
Third quarter multi-client sales were $62.2 million
PGS announces intention to register its shares in Spinnaker Exploration Company as part of its previously stated plans to divest of non-core assets and reduce debt
Operating Highlights
PGS is awarded a 10,000 square kilometer exclusive multi-client 3D contract in deepwater Brunei that will utilize the largest streamer spread ever deployed in the Asia Pacific region
PGS is awarded a contract to acquire 2,088 square kilometers of multi-client 3D data in Pakistan, with work expected to commence in the fourth quarter of 2000
PGS is awarded a contract to establish a data bank for Pertamina in Indonesia utilizing its proprietary PetroBank™ data management platform
PGS’ Ramform Banff mobilizes to shipyard for modifications to improve vessel roll motions and thereby improve uptime performance
Houston, Texas; Oslo, Norway; October 25, 2000: — Petroleum Geo-Services ASA (NYSE: PGO; OSE: PGS) reported today 2000 third quarter revenue of $246.9 million, an increase of 12% over the same period of the previous year.
Third quarter operating profit was $50.4 million, representing a 20% operating profit margin versus a 21% operating profit margin (before unusual items) for the 1999 third quarter.
Net income for the third quarter of 2000 was $17.3 million, versus $21.8 million (before unusual items) for the 1999 third quarter. Diluted earnings per share were $0.17 compared to diluted earnings per share (before unusual items) of $0.22 for the same period of 1999.
Reidar Michaelsen, Chairman of the Board and Chief Executive Officer, stated, “Oil and gas prices remain high due to tight supplies resulting from favorable global economic growth and limited excess productive capacity. Consequently, oil and gas companies have started increasing exploration and production spending due to the critical need to develop new reserves and enhance production from existing reservoirs. We expect to continue expanding our production and geophysical services businesses through deployment of our production expertise and our advanced geophysical technology. Specifically, geophysical products such as our PetroTrac™ suite of advanced reservoir technologies and our extensive inventory of multi-client 3D data covering some of the most prospective regions in the world should position PGS to capture a growing share of this higher spending.”
Michaelsen went on to say, “As announced earlier today, we intend to register our shares in Spinnaker Exploration Company as part of our previously disclosed plans to divest of non-core assets and reduce debt. This registration will give PGS the flexibility to dispose of its shares in an orderly fashion over the next 24 months.”
Review of Geophysical Services Operations
For the quarter ended September 30, 2000, the Company achieved total geophysical services revenue of $122.1 million, an increase of 10% over the same period of 1999, yielding an operating profit of $16.3 million. Multi-client sales revenue for the period totaled $62.2 million. The average amortization rate applied to multi-client sales during the third quarter was 57%.
The increase in geophysical services revenue primarily reflects improved pricing levels in the contract segment of the market. While we have allocated more vessels to this market segment, demand for our multi-client 3D data has remained steady. High oil and gas prices have resulted in record earnings for many oil and gas companies, which has translated into growing exploration and production spending. This increased spending is expected to be focused on enhancing production from existing reservoirs through application of reservoir-focused technologies such as our PetroTrac™ suite of advanced seismic tools, and on exploration and development in the highly prospective regions of Brazil, mid-Norway, deepwater Gulf of Mexico and West Africa; areas where PGS maintains a sizeable multi-client database.
During the third quarter, we continued to acquire data under our Brazilian multi-client programs. Offshore Brazil remains one of the most prospective regions in the world and major oil and gas companies have shown a high level of commitment to this area, leading to excellent interest in this data. Additionally, the future award of exploration and development licenses by host countries in regions such as West Africa and Asia Pacific should result in additional revenue from uplift fees due under previously executed multi-client sales contracts, as well as generate new interest in our multi-client data in those regions.
Review of Production Services Operations
For the quarter ended September 30, 2000, the Company achieved production services revenue of $124.8 million, a 15% increase as compared to the same period of the prior year, yielding an operating profit of $34.1 million. The higher revenue can be attributed to the Petrojarl Varg, acquired in July 1999; the Petrojarl Foinaven, due to higher production volumes during the period; the Petrojarl I, as a result of production under the Kyle early production contract; and increased activity at Atlantic Power, our platform services division. These increases were partially offset by lower revenue from the Ramform Banff resulting from the implementation of the vessel improvement plan.
During the third quarter, the Petrojarl I continued early well test production on the Kyle field. Production under this contract is expected to continue into November 2000. The Petrojarl I remains scheduled to begin production of Statoil’s Glitne field in the Norwegian sector of the North Sea in mid-2001 for a duration of between twenty-six and thirty months, with the first eighteen months non-cancelable. The Glitne contract will require an upgrade of the process capability of the Petrojarl I, the timing of which will depend upon the ultimate duration of the Kyle early production contract and other potential short term North Sea work. This upgrade is expected to enhance the value and utility of the vessel, and we expect a significant portion of the cost to be recouped via the Glitne contract. With respect to the Ramform Banff, the vessel departed the field during October for a shipyard in Germany, where a planned upgrade will significantly reduce vessel roll motions, thereby improving uptime performance. The upgrade, which has the support of the U.K. Health and Safety Executive and the Banff oil field partners, will require a short yard stay, after which the vessel is expected to be back in operation by year-end. No compensation will be required from PGS while production from the Banff field is temporarily suspended during the upgrade period.
On a matter related to the Banff field development, the Company has reached a settlement resolving outstanding litigation with DSND Subsea Ltd., a company that was contracted to perform certain subsea services for the Banff field development during 1998. The settlement includes all aspects of the contract that were disputed. The final settlement cost will be reflected as part of the cost of the Banff field development and will not have a material impact on the Company’s financial position or results from operations.