"Demand for well-placed, high quality seismic data continues to strengthen as oil companies return to exploration ' states CEO Hank Hamilton. "Our growth continues to outpace overall growth in the sector as a result of our selective investment strategy and excellent marketing team. We believe that we are in a unique position to benefit from an increasing focus on exploration combined with the upcoming schedule of attractive licensing rounds.'
Revenue Breakdown
Gross Late Sales of NOK 188,0 million increased 67% from Q1 2000 (NOK 112,8 million) and accounted for 75% of Gross Consolidated Revenues. Early Participant revenues totaled NOK 63,3 million, funding 59% of the Company's investment into the Multi-Client Library during the first quarter. Proprietary Contract Revenues in Q1 2001 were NOK 0,6 million.
Q1 Gulf of Mexico sales were strong in advance of the Central Gulf of Mexico OCS Lease Sale, where increased oil company activity levels were plainly evident. Asia/Pacific and Brazil sales also contributed significantly to the improved global results. Quarterly net revenues were split roughly 73%-27% between 2D and 3D respectively.
Operational Costs
The amortization charge associated with Net Multi-Client revenues was 35% of Net Revenues during Q1 2001. The corresponding amortization rate for Q1 2000 was 32%. This rate does fluctuate from quarter to quarter, depending on the sales mix of projects. Management expects an average amortization rate of 35-40% during 2001 as a result of the Company's steadily increasing investments in its Multi-Client Library.
Operational costs payable for the quarter, excluding materials, were NOK 40,2 million compared to NOK 31,1 in Q1 2000. Costs of materials were NOK 5,7 million versus NOK 2,2 in Q1 2000 due to higher deliverables costs associated with increased late sales. Personnel related costs were approximately NOK 8,4 million higher in Q1 2001 due to the addition of new project development and sales staff, the purchase of Symtronix corporation, and the effect of the Company's employee profit sharing plan. Other Operational costs remained approximately level with Q1 2000 (6% increase).
Profit
Operating Profit for the quarter was NOK 105,1 million, representing 44% of Net Revenues and a 58% increase over Q1 2000 (NOK 66,4 million).
The quarterly Pre-tax Profit of NOK 103,0 million was 85% higher than the NOK 55,7 million reported in Q1 2000.
EBITDA (Earnings before Interest, Tax, Depreciation and Amortization) for the three months ended March 31st was NOK 193,7 million, 81% of Net Revenues, up 62% from NOK 119,2 in Q1 2000.
Change in Exchange Rate/Financial Items
A portion of the increase in reported revenues stems from the change in exchange rate between the USD and the NOK. In Q1 2000, the average exchange rate was NOK 8,22 to the USD, while in Q1 2001 the corresponding rate was NOK 8,88 to the USD. This change eliminated, the increase in Net revenues would have been approximately 50%.
The rate of exchange between the USD and the NOK changed from 8,80 per December 31st 2000 to 9,12 per March 31st, 2001. In accordance with NGAAP, all balances in other currencies are recalculated at Balance Sheet Date to reflect the currency picture. As the Company's cash holdings in USD far exceed its debt in USD, the non-cash exchange loss of NOK 5,4 million associated with the USD 16,8 million loan per March 31st was reduced by a non-cash exchange gain on the cash holdings, resulting in a NOK 0,6 million negative impact on the Profit and Loss Statement.
Tax
Management estimates the tax rate for the year 2001 to be 34%. However, as the majority of the profits in Q1 2001 came from sales of US-owned surveys, the tax rate for Q1 2001 was 35,95%.
Net Income and Earnings per Share (EPS)
Net Income for Q1 2001 was NOK 66,0 million, up 82% from the NOK 36,2 million reported in Q1 2000. Earnings per Share (EPS) was NOK 2,70 undiluted and NOK 2,58 fully diluted, 80% and respectively 75% higher than reported in Q1 2000 (NOK 1,50 and NOK 1,48 per share).
Business Segments and Investments
TGS-NOPEC's main business is developing, managing, conducting, and selling non-exclusive seismic surveys. This activity accounted for virtually all of the Company's business during the quarter. Investments in the data library totaled NOK 106,4 million for the first quarter, 27% higher than in Q1 2000 (NOK 83,5 million), well in line with management's stated plan to increase annual MCS investments by 25% for the year 2001. The Company recognized NOK 63,3 million in Early Participant revenues during the quarter, funding 59% of the Multi-Client investments.
Balance Sheet
As of March 31st, 2000, the Company's total cash holdings amounted to NOK 306,7 million compared to NOK 224,6 million on December 31st, 2000. Total interest bearing debt was NOK 191,1 million versus NOK 206,1 million per December 31st, 2000.
Total Equity per March 31st, 2001 was NOK 885,4 million, 64% of Total Assets.
Operational Highlights
The Company added approximately 42,000 kms of 2D and 400 sq kms of 3D to its library of marketed surveys during the 1st quarter. A total of six different seismic vessels contributed to this effort. The Company also delivered the first phase of the Mississippi Canyon 3D pre-stack depth migration and a large portion of its first Brazil 2D pre-stack depth migration project.
TGS-NOPEC commenced a major new 1,500 sq km 3D project in the northwest shelf area of Australia during the first quarter using the Veritas DGC-operated Pacific Sword. During the quarter the Company secured the following vessel commitments for a number of announced new projects: WesternGeco's Sapphire (3D), COOGC's Nan Hai 502 (2D), and Multi-wave Geophysical's Polar Duke (2D). CGG's Amadeus (3D) returned to TGS-NOPEC's East Shetland Basin 3D project in April with completion expected in May. The Company also initiated a new pre-stack time migration reprocessing effort on a 1,500 sq-km 3D survey in the High Island area of the Gulf of Mexico.
In March TGS-NOPEC completed its acquisition of Symtronix Corporation, a Houston-based company specializing in seismic data loading and format conversions. Symtronix contributed approximately NOK 2,5 million in Net Revenues during the 1st quarter.
Outlook
The Company's backlog of secured pre-funding for new projects remains healthy, although it decreased slightly (8%) during the quarter to NOK 145,7 million.
As previously stated, the Company plans to increase its investments in Multi-Client projects by approximately 25% during 2001. While the exact mix of investment types is difficult to predict, the increase in investment levels will be primarily directed towards 3D activity and value-added products developed from our existing library.
Recent market estimates of 2001 E&P spending indicate perhaps stronger growth in the service sectors than previously anticipated. TGS-NOPEC maintains a strong data position in many of the most active global E&P areas. Assuming that commodity prices remain above levels that are "acceptable' to oil companies, we expect steady improvement in our business.
TGS-NOPEC is a leading global provider of non-exclusive seismic data and associated products to the oil and gas industry. TGS-NOPEC specializes in the planning, acquisition, processing, interpretation and marketing of non-exclusive surveys worldwide. The company places a strong emphasis on providing high-quality seismic data and the highest level of service to the industry. TGS-NOPEC also offers proprietary seismic acquisition and processing services, as well as gravity and aeromagnetic surveys.
TGS-NOPEC is listed on the Oslo Stock Exchange (OSLO:TGS).
Naersnes, May 9th, 2001
The Board of Directors of TGS-NOPEC Geophysical Company ASA
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