Petroleum Geo-Services ASA : Resilient MultiClient Performance – Q4 Non-cash Charges

Petroleum Geo-Services ASA (“PGS” or “the Company”) expects to report a full year 2015 EBITDA of approximately $485 million. For Q4 2015, the Company expects to report consolidated revenues of approximately $230 million and an EBITDA close to $120 million, excluding the charges and provisions described below. The Company achieved solid MultiClient revenues in Q4 of approximately $165 million, including approximately $98 million of pre-funding revenues. Capitalized MultiClient cash investment was approximately $75 million with a corresponding pre-funding level of approximately 130%, highlighting the attractiveness of PGS MultiClient projects and the reduced earnings volatility from the Company’s increased MultiClient focus. The low marine contract revenues in the quarter are mainly due to low average pricing and relatively high non-chargeable vessel time. The Company’s liquidity reserve at December 31, 2015 was approximately $560 million.

“Resilient MultiClient performance was the main contributor to the full year EBITDA of approximately $485 million, close to our latest 2015 EBITDA guidance. In the fourth quarter, we managed to increase late sales significantly from the three preceding quarters while maintaining a very high pre-funding level on increased MultiClient investments. In the current challenging market environment we find it prudent to adjust the book values of assets acquired in a stronger market,” says Jon Erik Reinhardsen, President & CEO.

The Company has completed its review of impairment of fixed and intangible assets. As a result of the weak market fundamentals the following non-cash impairment charges are expected to be made in the Q4 financial statements and reported in the income statement line “Impairments and loss on sale of long term assets”:

Goodwill and intangible assets, primarily stemming from acquisitions made in a significantly stronger market in 2007, will be written down by a total of approximately $170 million, with no remaining carrying value of goodwill in the Company’s balance sheet at year end 2015.
The MultiClient library will be written down by approximately $105 million. The MultiClient library is accounted for on a survey by survey basis. The write downs generally relates to surveys where the Company due to the lower oil price is experiencing lower revenues and where total expected sales are reduced and/or pushed out in time. The carrying value of the Company’s MultiClient library is approximately $700 million at December 31, 2015.

In addition, the Company expects to record a provision for onerous contracts of approximately $8 million in Q4. The provision represents the estimated loss in future periods relating to binding customer contracts where revenues are lower than the full cost of completing the contract. The provision will be reported in the income statement line “Other charges/(income)” and will be reversed over the periods during which the contractual services are rendered.

The Company has earlier disclosed that it expected to report restructuring and severance costs of approximately $30 million for the full year 2015. Due to an increased scope of cost initiatives in 2015, the estimate is increased to approximately $40 million for the full year, corresponding to approximately $25 million in Q4. Such costs are reported in the income statement line “Other charges/(income)”.

Financial items for Q4 2015 are expected to be a net cost of approximately $20 million. The Company has not completed its review of tax provision, but expect that no or limited deferred tax benefits will be recognized relating to the charges described above.

The Company provides this information based on preliminary consolidated numbers. The Company has not completed all review and control procedures relating to its financial reporting, and some significant year-end financial reporting procedures, including tax provision, have not yet been completed. The Company’s independent auditor has not completed the audit of the 2015 financial statements. The estimates provided in this release are therefore subject to change and the Q4 2015 financial statements finally approved and released by the Company may deviate materially from the information herein.

The Company will present its Q4 and preliminary full year 2015 results on February 15, 2016.