PGS Announces Q4 & Preliminary Full Year 2020 Results

Source: 2/4/2021, Location: Europe

Takeaways 2020
- Segment Revenues and Other Income of $595.9 million, compared to $880.1 million in 2019
- Segment EBITDA of $397.7 million, compared to $556.1 million in 2019
- Segment EBIT (excluding impairments and other charges) of $12.2 million, compared to $96.4 million in 2019
- Segment MultiClient pre-funding revenues of $218.6 million, with a corresponding pre-funding level of 98%, compared to $256.5 million and 105%, respectively, in 2019
- Cash flow from operations of $366.5 million, compared to $474.3 million in 2019
- As Reported revenues and Other Income according to IFRS of $512.0 million and an EBIT loss of $188.0 million, compared to $930.8 million and EBIT of $54.6 million, respectively, in 2019
- Impairment charge of $108.4 million in 2020 relating to stacked vessels and a higher estimated weighted average cost of capital used for impairment testing
- Recorded (as Other Income) government grants relating to the Covid-19 pandemic of $38.8 million in 2020, hereof $15.5 million estimated for Q4 Strong project execution despite logistical challenges and travel restrictions caused by Covid-19 pandemic
- Reduced annual run rate gross cash cost by more than $200 million compared to initial 2020 plan to compensate for a revenue reduction of 37% caused by the Covid-19 pandemic
- Extension of all debt maturities and amortization to September 2022 and beyond (see description in Note 11 in the Condensed Interim Consolidated Financial Statements)

“2020 developed very differently than any of us expected. In Q1 the seismic market quickly changed from an improving path to an abrupt downturn. Preventive measures to reduce spreading of the coronavirus caused a dislocation in the oil market and a significant reduction in our clients’ investment plans. We reacted swiftly by reducing cost and preserving liquidity. Gross cash cost was slashed by more than $200 million from stacking vessels, significant downscaling of the organization, renegotiating terms with suppliers and several other initiatives. Further, we have worked through the year to preserve liquidity by implementing extension of maturities and debt amortization to September 2022 and beyond. These measures allow us to cope with this downturn and more quickly return to generating positive cash flow and repaying debt.

MultiClient late sales in the fourth quarter benefited from a usual end-of-year increase and license round activity in West Africa and Brazil. New acquisitions of MultiClient data were mainly done offshore Egypt and we returned to Brazil with one vessel to continue our Campos deep water campaign, initially started in early 2020. During Q4 we sold well from MultiClient surveys acquired in earlier quarters but still in the processing phase, boosting our pre-funding level to 185% on MultiClient cash investment of $33 million. Only 8% of our vessel capacity was allocated to contract work in the quarter, a 4D project offshore Angola.

We launched a UK Scheme of Arrangement in Q4 to implement the re-scheduling of debt maturities and amortizations that we had agreed with an overwhelming majority of lenders. An English court sanctioned the scheme on February 2 this year allowing for the debt re-scheduling to be implemented. The transaction is expected to close during February.

The order book increased during the quarter. It now stands at $202 million and with additional bookings at the start of this year we have good visibility through the second quarter and into the third quarter. We expect 2021 to be slightly better than last year. The current booking and bidding activity together with our MultiClient project pipeline, supports our cautiously positive view and expectation of increased acquisition activity from early Q2.” Rune Olav Pedersen, President and Chief Executive Officer

PGS expects the improved oil price, a likely global recovery from the Covid-19 pandemic, and the effects of deferred projects from last year to support a gradual increase of demand for seismic services in 2021. Despite the impacts of the Covid-19 crisis, energy consumption is expected to continue to increase longer term with oil and gas being an important part of the energy mix as the global energy transition evolves. Offshore reserves will be vital for future supply and support demand for marine seismic services. The recovery of the seismic industry is likely also to benefit from the recent industry capacity reductions.

Based on five vessels in operation through 2020, and with reference to the disclosed risk factors, PGS expects full year 2021 gross cash costs to be below $400 million.

2021 MultiClient cash investments are expected to be approximately $150 million.

Approximately 45% of 2021 active 3D vessel time is expected to be allocated to MultiClient acquisition.

Capital expenditures for 2021 is expected to be approximately $40 million.

The order book totaled $202 million on December 31, 2020 (including $89 million relating to MultiClient). The order book was $160 million on September 30, 2020 and $322 million on December 31, 2019.

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