In parallel, TGS-NOPEC will waive its option to extend the bareboat charter agreement for the M/V Northern Access, thereby terminating the current agreement with Baltic Tugs. The Northern Access will be returned to its owner in November 2002.
"The benefits of these steps are three-fold," stated TGS-NOPEC's CEO Hank Hamilton. He continued: "First of all, the agreement allows us to lock in lower acquisition costs for up to five years. Secondly, the opportunity to select from a fleet of vessels increases our flexibility with respect to geographical and seasonal factors. Thirdly, we can now more fully concentrate our efforts on our core business of developing and selling multi-client projects as opposed to managing and operating vessels. For many years we have utilized SMNG vessels to supplement our fixed capacity with excellent results and we are confident that SMNG will continue to deliver reliable and high quality service."
Management expects to realize a positive net cash effect of approximately US $9 million from this restructuring of vessel capacity over the full five-year term.
TGS-NOPEC currently carries a residual net book value in its balance sheet from the original seismic rigging of Northern Access. Although the removable seismic equipment onboard the Northern Access has been sold to SMNG, the residual net book value from investments in structural and fixed changes to the vessel will be unrecoverable. Subsequently, the redelivery of the vessel will result in a non-cash write-off charge of approximately USD 5 million. In accordance with NGAAP, the Company will provide for this in its 3rd quarter 2002 results.
"This is a decision with very positive long term effects," CFO Arne Helland stated. "Although it is unpleasant to recognize a write-off of the Northern Access, our focus is on the long-term value created for our shareholders. Even when including the effect of the current write-down, the net positive P&L impact for the Company over the coming 10 years will be approximately USD 9 million. The cash savings further give us the opportunity to create more shareholder value."
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