PGO is out.Financial Highlights
-- First quarter revenue increases by 43% over the prior year
despite a significant reduction in seismic capacity
-- First quarter diluted earnings per share were $0.06
-- Production services revenue totals $111.0 million, 52% of
total revenue, for the first quarter
-- First quarter multi-client sales increase by 54% over the
prior year period
-- PGS issues $225 million of floating rate senior unsecured
notes in March. Net proceeds were used to repay bank debt and
to enhance liquidity
Operating Highlights
-- PGS is awarded the largest seafloor multi-component contract
in the industry after various field tests were performed in
direct competition with other contractors
-- PGS is awarded an early well test contract in the North Sea
for the Petrojarl I. Production is expected to commence during
the second quarter
-- PGS is awarded one of the industry's largest land contracts in
the Middle East
-- PGS is awarded a five year, approximately $240 million,
contract extension covering the operation of Kerr McGee's
North Sea facilities
-- Seismic fleet backlog continues to strengthen
Petroleum Geo-Services ASA (NYSE:PGO) (OSE:PGS) reported improved 2000 first
quarter earnings, reflecting higher revenue from multi-client sales and the
production services group as compared to the same period of 1999. With oil and
gas companies cautiously optimistic about the stability of hydrocarbon prices,
the geophysical market began a slow recovery from the depressed activity levels
of 1999. Additionally, the acquisition of the Petrojarl Varg in July 1999,
together with improved production from the Ramform Banff, which began production
on January 31, 1999, positively impacted results for the first quarter as
compared to the same period of 1999.
The Company's 2000 first quarter revenue of $212.7 million represents a 43%
increase over the same period of the previous year. First quarter operating
profit was $27.1 million, representing a 13% operating profit margin.
The Company's net income for the first quarter of 2000 was $6.7 million, an
increase of $5.2 million over net income (before unusual items and accounting
change) for the 1999 first quarter. Diluted earnings per share were $0.06
compared to diluted earnings per share (before unusual items and accounting
change) of $0.02 for the same period of 1999.
Reidar Michaelsen, Chairman of the Board and Chief Executive Officer, stated,
"Our first quarter results reflect the slowly improving climate for oilfield
services and geophysical services in particular. With North Sea Brent crude oil
prices settling into a range of $20 to $25 per barrel and based upon customer
inquiries, we expect to see renewed demand for seismic data and a revived
seismic contract market starting in the third quarter of 2000. Our production
services operations continue to improve, particularly with the resolution of
many of the operational problems that effected the Ramform Banff FPSO during the
1999 fourth quarter and the early part of 2000. Additionally, the completion of
the Norwegian 16th licensing round, which covered many blocks where we have
multi-client seismic data, should result in continued improvement in our
geophysical results."
Michaelsen went on to say, "With respect to multi-client data, our library cash
investment for the first quarter was $72 million, and we remain on target to
generate positive cash flow from the library for 2000. While we believe 1999 may
have been the most difficult year on record for the seismic industry, the worst
seems to be behind us and our market position has improved as a result of
capacity reductions within the industry and improving market conditions."
Review of Geophysical Services Operations
For the quarter ended March 31, 2000, the Company achieved total geophysical
services revenue of $101.7 million, of which $56.3 million represented
multi-client sales, yielding an operating profit of $6.4 million. The average
amortization rate applied to multi-client sales during the first quarter was
57%.
The improvement in geophysical services revenue reflects the early stages of a
recovery in demand for oilfield services. Oil and gas companies are increasing
exploration and development spending due to a more stable hydrocarbon price
environment resulting from renewed discipline on the part of oil producing
nations and increasing worldwide demand for oil. Additionally, as the pace of
consolidation within the oil and gas industry has slowed, oil and gas companies
have begun to focus on developing new fields and prospects, particularly in the
highly prospective areas of Brazil, mid-Norway, deepwater Gulf of Mexico and
West Africa.
During the first quarter, we continued to acquire data under our Brazilian
multi-client programs and have achieved excellent interest in this data, with
prefunding levels in excess of 50%. Additionally, the Norwegian 16th licensing
round, completed in April 2000, included a substantial number of blocks covered
by the Company's multi-client data library. The award of these blocks should
generate increased interest in the Company's data library during 2000. With
respect to Nigeria, our deepwater multi-client data program should benefit from
the pending bid round scheduled for the latter half of 2000, with the award of
the deepwater blocks expected shortly thereafter.
Overall, at March 31, 2000, the Company had $333 million of in-process seismic
data and $537 million of finished seismic data available for sale. All of the
seismic data is 3D or multi-component geophysical information and approximately
80% of this data has been acquired in the last 24 months. Of the finished
seismic data available for sale, approximately 80% was completed during the past
24 months. Most of the Company's seismic data is located in deepwater areas in
the Gulf of Mexico, West Africa, Brazil, Norway, West of Shetlands, Egypt and
Australia. In addition, the Company maintains a sizeable database in the gas
prone areas on the continental shelves in the Gulf of Mexico, the UK sector of
the North Sea, Norway, Indonesia and certain areas in the Middle East. The
Company believes its current data library is one of the largest and newest 3D
seismic databases available in the industry.
Review of Production Services Operations
For the quarter ended March 31, 2000, the Company achieved production services
revenue of $111.0 million, a 46% increase as compared to the same period of the
prior year, yielding an operating profit of $20.7 million. Revenue from the
Petrojarl Varg, acquired in July 1999, as well as higher revenue from the
Ramform Banff, positively affected revenue for the first quarter of 2000. The
Company continues to make improvements in the operational performance and uptime
of the Ramform Banff. In addition to the Kyle field, we also continue to pursue
a number of other fields in the vicinity of the Ramform Banff that are
candidates for production through this facility.
During the first quarter, the Petrojarl I was awarded a new contract to perform
an early well test on the Kyle field that is expected to commence in May 2000,
and continue through October 2000. Upon completion of the Kyle field early well
test, the vessel will undergo a standard five-year inspection and a minor
upgrade that should allow certification for an additional fifteen years of
operation in the North Sea. Following the certification and upgrade, the
Petrojarl I is expected to work on a multi-year contract, several of which are
currently under discussion. In April 2000, PGS was awarded a five year,
approximately $240 million, contract extension covering field operations support
services to Kerr McGee's fixed installation and floating production facilities
located in the North Sea. The fully incentivized contract, an expansion of our
existing relationship with Kerr McGee, reconfirms our leading position as the
preferred provider of operation management services in the North Sea.
Petroleum Geo-Services' first quarter earnings conference call is scheduled for
Friday, April 28th 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 Friday, May 5, 2000 at 800/933-9609 or
402/530-8098 for international callers. Additionally, Petroleum Geo-Services'
1999 Annual Report, including audited financial statements, is now available at
the web site noted above.
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, 4D and 4C marine
seismic data. Such data is 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. 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 oil and gas from offshore oil and gas fields
more cost-effectively. PGS also provides data management solutions, 4D reservoir
monitoring and characterization studies, and other specialized geophysical
services. PGS operates on a worldwide basis with headquarters in Houston, Texas,
and Oslo, Norway.
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.
- FINANCIAL TABLES TO FOLLOW -
To access more information, visit our web site: www.pgs.com
Petroleum Geo-Services ASA
Consolidated Income Statements (5)
----------------------------------------------------------------------
Quarter ended Year ended
March 31, December 31,
------------- ------------
(In thousands of dollars, 2000 1999 1999
except for share data) ---- ---- ----
----------------------------------------------------------------------
Revenue $ 212,730 $ 148,664 $ 788,160
----------------------------------------------------------------------
Cost of sales 102,712 62,741 333,060
Depreciation and amortization 61,640 42,710 238,576
Research and technology costs 2,657 5,669 15,859
Selling, general and
administrative costs 18,580 17,767 71,738
Unusual items, net (1) -- 60,989 89,855
----------------------------------------------------------------------
Total operating expenses 185,589 189,876 749,088
----------------------------------------------------------------------
Operating profit 27,141 (41,212) 39,072
Financial expense, net (4) (29,937) (19,649) (95,969)
Other income, net (2) 2,811 11,127 18,715
----------------------------------------------------------------------
Income (loss) before income taxes
and cumulative effect of
accounting change 15 (49,734) (38,182)
Provision (benefit) for income
taxes (6,644) (15,299) (41,890)
----------------------------------------------------------------------
Income (loss) before cumulative
effect of accounting change 6,659 (34,435) 3,708
Cumulative effect of accounting
change, net (3) -- (19,977) (19,977)
----------------------------------------------------------------------
Net income (loss) $ 6,659 $ (54,412) $ (16,269)
----------------------------------------------------------------------
Basic earnings (loss) per share
before cumulative effect
of accounting change $ 0.07 $ (0.38) $ 0.04
Cumulative effect of accounting
change, net (3) -- $ (0.23) $ (0.21)
----------------------------------------------------------------------
Basic earnings (loss) per share $ 0.07 $ (0.61) $ (0.17)
----------------------------------------------------------------------
Diluted earnings (loss) per share
before cumulative effect
of accounting change $ 0.06 $ (0.38) $ 0.04
Cumulative effect of accounting
change, net (3) -- $ (0.23) $ (0.21)
----------------------------------------------------------------------
Diluted earnings (loss) per share $ 0.06 $ (0.61) $ (0.17)
----------------------------------------------------------------------
Basic shares outstanding 101,596,483 89,547,805 94,767,967
----------------------------------------------------------------------
Diluted shares outstanding 102,656,325 89,547,805 95,840,199
----------------------------------------------------------------------
Notes:
(1) Unusual items, net for the year ended December 31, 1999
includes $74.0 million (of which $52.1 million was incurred in
the first quarter of 1999) in employee termination costs,
lease termination/revision costs, vessel derigging costs and
equipment impairments directly related to restructured
operations, as well as $15.9 million (of which $8.9 million
was incurred in the first quarter of 1999) in asset
impairments necessitated by market conditions.
(2) Other income, net for 1999 includes $19.1 million (of which
$9.4 million was received in the first quarter of 1999) in UK
lease gains related to the Ramform Victory and the Ramform
Vanguard which were delivered in January and April of 1999,
respectively.
(3) Effective January 1, 1999, the Company adopted Statement of
Position (SOP) 98-5, "Reporting on the Costs of Start-up
Activities." This SOP requires that the initial, one-time
costs related to introducing new products and services,
conducting business in new territories or commencing new
operations be expensed as incurred. Accordingly, the Company
has recognized a charge to income of $28.0 million ($20
million net of tax) as the cumulative effect of the change in
accounting principle.
(4) For information regarding $143.8 million liquidation amount of
9.625% trust preferred securities issued by PGS Trust I, a
statutory business trust formed by the Company, see footnote
(3) to the Consolidated Income Statement contained in the
Company's Report on Form 6-K dated October 22, 1999. Financial
expense, net for the first quarter ended March 31, 2000 and
the year ended December 31, 1999, includes $3.7 million and
$7.7 million, respectively, in minority interest expense
related to the trust's securities. The sole assets of the
trust are junior subordinated debentures of the Company that
bear interest at the rate of 9.625% per year and mature on
June 30, 2039. As of March 31, 2000, the trust held $148.2
million principal amount of such debentures.
(5) Certain reclassifications have been made to conform prior year
amounts with the current year presentation.
Petroleum Geo-Services ASA
Consolidated Balance Sheets (5)
----------------------------------------------------------------------
March 31, December 31,
(In thousands of dollars, 2000 1999
except for share data)
----------------------------------------------------------------------
Assets
Cash and cash equivalents $ 64,233 $ 63,044
Accounts receivable, net 234,990 240,634
Other current assets 111,857 94,926
----------------------------------------------------------------------
Total current assets 411,080 398,604
Multi-client library, net 870,233 816,423
Property and equipment, net 2,405,153 2,429,848
Goodwill and other long-term assets, net 533,451 531,776
----------------------------------------------------------------------
Total assets $4,219,917 $4,176,651
----------------------------------------------------------------------
Liabilities and Shareholders' Equity
Short-term debt and current portion
of long-term debt and capital
lease obligations $ 20,533 $ 22,409
Accounts payable and accrued expenses 238,234 232,277
Income taxes payable 9,684 9,805
----------------------------------------------------------------------
Total current liabilities 268,451 264,491
Long-term debt 2,028,712 1,986,143
Long-term capital lease obligations 10,325 12,387
Other long-term liabilities 103,960 104,737
Deferred income taxes 79,852 79,852
----------------------------------------------------------------------
Total liabilities 2,491,300 2,447,610
----------------------------------------------------------------------
Commitments and contingencies
Guaranteed preferred beneficial
interest in PGS junior
subordinated debt
securities (4) 139,373 139,164
Shareholders' equity:
Common stock, par value NOK 5;
issued & outstanding 101,759,837
and 101,609,587 shares at
March 31, 2000 and
December 31, 1999, respectively 70,218 70,126
Additional paid-in capital 1,210,337 1,208,873
Retained earnings 334,044 327,385
Accumulated other comprehensive loss (25,355) (16,507)
----------------------------------------------------------------------
Total shareholders' equity 1,589,244 1,589,877
----------------------------------------------------------------------
Total liabilities and
shareholders' equity $4,219,917 $4,176,651
----------------------------------------------------------------------
Petroleum Geo-Services ASA
Consolidated Statements of Cash Flows (5)
------------------------------------------------------------------------
Quarter ended Year ended
March 31, December 31,
------------- ------------
2000 1999 1999
(In thousands of dollars) ---- ---- ----
------------------------------------------------------------------------
Cash flows from operating
activities:
Net income (loss) $ 6,659 $ (54,412) $ (16,269)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization
charged to expense 61,640 42,710 238,576
Non-cash charges -- 81,050 83,805
Provision for deferred
income taxes (6,644) (23,444) (53,471)
Working capital changes and
other items (5,536) 48,084 (51,963)
----------------------------------------------------------------------
Net cash provided by operating
activities 56,119 93,988 200,678
----------------------------------------------------------------------
Cash flows from investing
activities:
Investment in multi-client
library (71,895) (103,641) (338,718)
Capital expenditures (20,092) (134,494) (667,869)
Cash acquired in purchase
acquisition -- -- --
Other items, including net
proceeds from UK leases (2,735) 7,170 5,496
----------------------------------------------------------------------
Net cash used in investing
activities (94,722) (230,965) (1,001,091)
----------------------------------------------------------------------
Cash flows from financing
activities:
Net proceeds from issuance of
long-term debt 223,845 -- 195,712
Net proceeds from issuance of
guaranteed preferred beneficial
interest in PGS junior
subordinated debt securities -- -- 138,914
Net proceeds from issuance of
common stock 1,555 248 220,024
Repayment of long-term debt (3,826) (7,019) (29,924)
Net increase (decrease) in
revolving and short-term debt (179,909) 154,205 283,334
Principal payments under
capital lease obligations (1,804) (5,076) (13,437)
Lease financing of owned equipment -- -- 15,512
----------------------------------------------------------------------
Net cash provided by financing
activities 39,861 142,358 810,135
----------------------------------------------------------------------
Effect of exchange rate changes
in cash and cash equivalents (69) 56 49
Net increase (decrease) in cash
and cash equivalents 1,189 5,437 9,771
Cash and cash equivalents at
beginning of period 63,044 53,273 53,273
----------------------------------------------------------------------
Cash and cash equivalents at
end of period $ 64,233 $ 58,710 $ 63,044
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