Naersnes, Norway, September 12th, 2002, - TGS-NOPEC Geophysical Company (OSLO:TGS) today announced an agreement with POLAR TRADE GROUP Ltd and Russian SEVMORNEFTEGEOFIZIKA Trust (SMNG) to charter 2D seismic vessel capacity for an initial minimum period of 3 years with two optional 12-month extension periods. Under this new agreement, TGS-NOPEC will have access to multiple SMNG vessels including Akademik Nemchinov, Akademik Shatskiy, Akademik Lazarev, Professor Polshkov, Professor Rjabinkin, Iskatel-3 and Iskatel-5. TGS-NOPEC commits to contract a minimum of 12 vessel-months per year from SMNG's 2D seismic vessel fleet beginning in January 2003.
In parallel, TGS-NOPEC will waive its option to extend the bareboat charter agreement for the M/V Northern Access, thereby terminating the current agreement with Baltic Tugs. The Northern Access will be returned to its owner in November 2002.
"The benefits of these steps are three-fold," stated TGS-NOPEC's CEO Hank Hamilton. He continued: "First of all, the agreement allows us to lock in lower acquisition costs for up to five years. Secondly, the opportunity to select from a fleet of vessels increases our flexibility with respect to geographical and seasonal factors. Thirdly, we can now more fully concentrate our efforts on our core business of developing and selling multi-client projects as opposed to managing and operating vessels. For many years we have utilized SMNG vessels to supplement our fixed capacity with excellent results and we are confident that SMNG will continue to deliver reliable and high quality service."
Management expects to realize a positive net cash effect of approximately USD 9 million from this restructuring of vessel capacity over the full five-year term.
TGS-NOPEC currently carries a residual net book value in its balance sheet from the original seismic rigging of Northern Access. Although the removable seismic equipment onboard the Northern Access has been sold to SMNG, the residual net book value from investments in structural and fixed changes to the vessel will be unrecoverable. Subsequently, the redelivery of the vessel will result in a non-cash write-off charge of approximately USD 5 million. In accordance with NGAAP, the Company will provide for this in its 3rd quarter 2002 results.
"This is a decision with very positive long term effects," CFO Arne Helland stated. "Although it is unpleasant to recognize a write-off of the Northern Access, our focus is on the long-term value created for our shareholders. Even when including the effect of the current write-down, the net positive P&L impact for the Company over the coming 10 years will be approximately USD 9 million. The cash savings further give us the opportunity to create more shareholder value."
TGS-NOPEC is a leading global provider of multi-client geoscience data and associated products and services to the oil and gas industry. TGS-NOPEC specializes in the planning, acquisition, processing, interpretation and marketing of non-exclusive seismic surveys worldwide. A2D Technologies, a wholly owned subsidiary, pioneered the delivery of digital well log data over the Internet and currently offers a one-of-a-kind integrated solution for well log data sourcing, well log data management, and well log correlation. The TGS-NOPEC group places a strong emphasis on providing high-quality data and the highest level of service to the industry.
All statements in this press release other than statements of historical fact are forward-looking statements, which are subject to a number of risks, uncertainties and assumptions. These include TGS-NOPEC's reliance on a cyclical industry and principal customers, the company's ability to continue to expand markets for licensing of data, and the company's ability to acquire and process data products at costs commensurate with profitability. Actual results may differ materially from those expected or projected. TGS-NOPEC undertakes no responsibility to update forward-looking statements.
For additional information about this news release please contact:
Arne Helland, CFO
Telephone: +47-31-29-20-00 / +47-91-88-78-29
John Adamick, VP Business Development
Telephone: +1 713-860-2102