PGS Mulls Splitting Geophysical and Production Into Two Companies

Petroleum Geo-Services says, following a comprehensive review of PGS' strategy and financial structure, its Board of Directors has decided to refinance most of the Company's debt by raising a new $1 billion facility, comprised of a $850 million term loan and $150 million revolving credit facility and launching a tender offer for all of its $746 million outstanding 10% Senior Notes due 2010. In addition to reduced interest expenses and extended maturities the refinancing will improve the Company's financial and strategic flexibility. Earlier this month, PGS completed the redemption of its 8% Senior Notes due 2006.

The Company aims to complete the refinancing in the fourth quarter of 2005. Completion will, inter alia, be contingent upon bondholder tender acceptance and market conditions. If successful, the refinancing is expected to result in a one-time charge in the financial statements of approximately $100 million, largely due to the current trading levels of the bonds, with the Company receiving the financial benefits therefrom through reduced interest expenses in future periods.

PGS further announced that it will explore possibilities for separating into two independently listed companies, Geophysical and Production. PGS believes that the two entities may be more effectively developed and grown as separate companies. The objective is to achieve a separation in 2006. PGS will revert with additional information on this process at its Capital Markets Day in Oslo and New York, December 5 and 6, 2005.

PGS' turnover in the last 12 months to September 2005 relating to Geophysical and Production businesses respectively was $829 million and $282 million. PGS' Geophysical business is one of the world's leading operators in marine seismic, with a global market share in excess of 30 percent, and is a significant operator in the onshore seismic market. PGS' Production business is a pioneer within floating production, and owns and operates the largest and most advanced fleet of Floating Production Storage and Offloading vessels in the North Sea, and is also targeting significant growth opportunities in international markets. The Company has retained ABG Sundal Collier and UBS Investment Bank as financial advisors on the evaluation of a possible separation. The refinancing is jointly lead arranged by UBS Securities LLC, Credit Suisse First Boston and Barclays Capital.

PGS President and CEO, Svein Rennemo stated:

``Refinancing in the current, favorable debt market will provide PGS with more attractive financing and increased flexibility. The strong market outlook for both our Geophysical and Production businesses underlines the potential in fully exploiting the growth capability and opportunities within each one of them independently of the other. We believe that direct access to the capital markets for both Geophysical and Production would allow us to capture more opportunities for value creation, benefiting shareholders, customers and employees. This is why we want to explore this direction and why we target a refinancing in 2005 and a separation in 2006.''

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