Financial Highlights
- First quarter Geophysical Services revenue increases 14% over the 2000 first quarter
- First quarter Production Services revenue decreases 16% over the 2000 first quarter, primarily due to the upgrade of two FPSOs during the period
- First quarter operating profit margin (before unusual items) is 12%
- First quarter diluted earnings per share (before unusual items) is $0.04
- PGS closes on the sale of its global Petrobank data management business and related software to Landmark Graphics, a subsidiary of Halliburton, for $175.0 million in cash
- First quarter results include an unusual net after tax gain of $101.5 million, or $0.99 per share, related to several unusual items
- PGS completes a $240 million limited recourse asset securitization related to a portion of its multi-client data library
Operating Highlights
- PGS secures a strong backlog of contract seismic work with improved margins that extends through the third quarter of 2001
- The Ramform Banff resumed production on the Banff field and has demonstrated significantly improved motion characteristics and steady production with 99% uptime since returning to the field
- Petrojarl 1 continues to undergo class work and topsides modifications in preparation for the start of production on the Glitne field in the Norwegian sector of the North Sea, expected early in the third quarter of 2001
- PGS announces the appointment of Diz Mackewn as the new President of the PGS Geophysical Services Group
Houston, Texas; Oslo, Norway; April 25, 2001: — Petroleum Geo-Services ASA (NYSE: PGO; OSE: PGS) reported today first quarter revenue of $209.4 million, only 2% lower than first quarter 2000, despite the loss of revenue from two FPSOs that were undergoing shipyard upgrades during the period. PGS’ revenue mix of Geophysical Services and Production Services for the 2001 first quarter was 55% and 45%, respectively.
First quarter operating profit (before unusual items) was $25.5 million, 6% lower than 2000’s first quarter operating profit. First quarter operating profit margin (before unusual items) was relatively flat, with 12% for 2001 and 13% for 2000. While the overall operating profit was down as compared to the comparable period of the prior year, the Geophysical Services business experienced an 11% increase in operating profit while Production Services, as a result of the aforementioned FPSOs undergoing shipyard modifications, had a decrease of 11%.
Included in unusual items, net in the 2001 first quarter is a $111.9 million after-tax gain related to the sale of PGS’ Petrobank data management business and related software to Halliburton and the successful resolution of various tax contingencies. These gains were partially offset by $10.4 million in after-tax charges related to reorganization costs, including severance for the departure of several members of management during the period and the expected cost of the resolution of various pending litigation matters.
First quarter net income (before unusual items) was $3.9 million, versus comparable net income of $6.7 million for the 2000 first quarter. First quarter diluted earnings per share (before unusual items) were $0.04, versus a comparable $0.06 for the 2000 first quarter.
Reidar Michaelsen, Chairman of the Board and Chief Executive Officer, stated, “This quarter has been very significant for the future development of PGS. We have made several changes to our organization. With Diz Mackewn now leading the Geophysical Services Group and Kaare Gisvold leading one of the industry’s most experienced FPSO operations, I believe PGS is well positioned to capture greater market share in its two core businesses. In general, the seismic market is now behaving much better and we see an increase in future demand for our data library and a more balanced supply and demand picture, particularly in the North Sea, Canada and the Asia Pacific regions. As a result, our seismic fleet is experiencing the strongest contract backlog in several years. While our Production Services revenue was lower than originally anticipated, the successful resumption of production by the Ramform Banff in March and the anticipated return of the Petrojarl 1 in July 2001 will increase this revenue going forward.”
Michaelsen went on to say, “We are also pleased with closing on the sale of our Petrobank data management business and related software to Landmark Graphics, a subsidiary of Halliburton. This transaction demonstrates our continued commitment to dispose of non-core businesses, refocus our operations towards our core competencies and reduce our debt level. Our continuing relationship with Halliburton as a result of this transaction should create additional shareholder value through new outlets for our geophysical data and technology. Additionally, the successful securitization of future multi-client data library sales represents a groundbreaking transaction that further reaffirms the quality of our seismic data. The proceeds will be repaid solely from future data sales and PGS and its shareholders will retain all of the future upside.”
Review of Geophysical Services Operations
For the first quarter, PGS’ Geophysical Services revenue totaled $116.1 million, up 7% and 14% from the fourth and first quarters of 2000, respectively. The first quarter increase between 2001 and 2000 was primarily attributable to higher contract seismic revenue. Multi-client seismic revenue for the first quarter was $59.1 million, an increase of 5% from the same period of 2000, and carried an average amortization rate of 67%, versus 57% for the comparable period of 2000. Total first quarter operating profit (before unusual items) from Geophysical Services was $7.1 million.
Sustained higher oil and gas prices have led industry analysts to increase estimates for exploration and development spending in 2001 and 2002. PGS expects that a growing portion of this greater oil and gas company spending will be focused on the application of enhanced production techniques – such as PGS’ PetroTrac™ suite of advanced seismic tools – to existing reservoirs. Additionally, these higher prices should lead to increased exploration offshore Brazil and West Africa and in the Asia Pacific region, the North Sea, and deepwater Gulf of Mexico – areas where PGS has focused its multi-client activity. The future award of exploration and development licenses by host countries in West Africa and the Asia Pacific region should result in incremental revenue to PGS from uplift fees due under previously executed multi-client sales contracts. PGS also expects that a rapidly growing contract market for its high-density Ramform reservoir characterization services will result in a significant increase in marine contract activity. Furthermore, seismic activity should increase as oil and gas companies look for additional drilling prospects to offset declining production. PGS expects that the improved contract market will result in reduced levels of multi-client investment in the future.
Review of Production Services Operations
The upgrade of the process capability of the Petrojarl I continued throughout the first quarter and the FPSO remains scheduled to begin production of the Glitne field early in the third quarter of 2001. This upgrade, necessary to prepare the vessel for the Glitne Contract, also positions the vessel for further work in the Norwegian sector of the North Sea. The Petrojarl I is expected to remain in production on the Glitne field for twenty-six to thirty months, with the first eighteen months non-cancelable. On March 29, 2001, the re-tooled Ramform Banff resumed production on the Banff field. The Ramform Banff suspended operations in September 2000 to undergo a comprehensive modification program designed to improve vessel roll motions and general vessel operability and to repair damage incurred during extreme weather earlier in the year. Based upon experience to date, we believe the modifications have been successful in addressing previous operational problems. In addition, PGS has filed significant insurance claims which, in total, amount to more than $40 million.
For the first quarter, Production Services revenue totaled $93.3 million, down 8% and 16% from the fourth and first quarters of 2000, respectively. The year over year revenue decrease was primarily attributable to the ongoing upgrade of the Petrojarl I, which did not operate during the first quarter of 2001, the Ramform Banff, which resumed production on the Banff field on March 29 and lower platform services activity. These decreases were partially offset by higher revenue from the spot charter of excess shuttle tanker capacity. First quarter operating profit (before unusual items) from Production Services was $18.4 million, representing a 20% operating profit margin.
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Petroleum Geo-Services’ first quarter earnings conference call is scheduled for April 25, 2001 at 9:30 a.m. EST. Interested parties may listen to the call via Petroleum Geo-Services’ web site at www.pgs.com. PGS suggests that you connect with the site at least fifteen minutes prior to the call to ensure adequate time for any software download that may be needed to hear the call. There will be a digital replay of the conference call beginning at 11:30 a.m. EST on the day of the call through Wednesday, May 2, 2001 at 1-800-468-0325 or 1-402-998-0109 for international callers (Passcode: PGS Conference Call).
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Petroleum Geo-Services is a technologically-focused oilfield service company principally involved in two businesses: Geophysical Services and Production Services. PGS acquires, processes, manages and markets 3D, time-lapse and multi-component seismic data. These data are 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.
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The information included herein contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical and future trends, on general economic and business conditions and on numerous other factors, including expected future developments, many of which are beyond the control of the Company. Such forward-looking statements are also subject to certain risks and uncertainties as disclosed by the Company in its filings with the Securities and Exchange Commission. As a result of these factors, the Company’s actual results may differ materially from those indicated in, or implied by, such forward-looking statements.
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