Geokinetics Reels in PGS' Global Onshore Seismic Business

Geokinetics and Petroleum Geo-Services have signed a definitive agreement under which Geokinetics, a leading provider of seismic data acquisition, processing and interpretation services, will acquire the onshore seismic data acquisition and multi-client data library business of PGS ("PGS Onshore") in a cash and stock transaction valued at approximately $210 million, on a cash free, debt free basis, which includes net working capital of $37.5 million. The final purchase price is subject to certain customary post-closing adjustments. The transaction is expected to close in the first quarter of 2010 and is subject to normal closing conditions and regulatory approvals; there is no financing condition.

The combination of Geokinetics and PGS Onshore will create the second largest provider of onshore seismic data acquisition services in the world in terms of crew count and the largest based in the Western Hemisphere. The combined company will have the assets and technical capabilities to support up to 38 crews and carry in excess of 207,000 equipment channels and over 150 vibroseis units; and possess in excess of 6,240 square miles of multi-client library data upon completion of current projects in progress. Empowered by a broad range of technologies that include transition zone ("TZ"), ocean bottom cable ("OBC") and land vibroseis, the new Geokinetics will be able to compete more effectively within the entire seismic value-chain of planning, proprietary and multi-client acquisition, processing and interpretation services. Furthermore, this acquisition will propel Geokinetics into new markets including Alaska and Mexico, as well as certain new countries in the Middle East and North Africa. As a result, Geokinetics will have a greater geographic reach overall, with a more significant presence in Africa and Asia and a leadership position in the Americas.

In 2008, PGS Onshore generated $71.9 million in EBITDA (a non-GAAP financial measure defined below) on revenues of $278.8 million. In the first nine months of 2009, it generated $9.2 million in EBITDA on revenues of $141.6 million. The 2009 decline in revenues and EBITDA is primarily due to a substantial drop in multi-client revenues as a result of lower natural gas prices in North America and a lack of new projects initiated in 2009. On a pro-forma basis, the new Geokinetics would be expected to generate in excess of $700 million in revenues for 2009. PGS Onshore had backlog of $196 million as of September 30, 2009, which combined with Geokinetics represents $455 million of pro-forma combined backlog at September 30, 2009. Geokinetics anticipates the transaction will be highly accretive to 2010 earnings.

Richard F. Miles, President and Chief Executive Officer of Geokinetics, said, "We are extremely pleased to enter into this agreement with PGS as it solidifies Geokinetics' position as the clear leader in the onshore seismic data acquisition business. With the addition of PGS Onshore's technologies; its broad international operations capable of working in diverse climate conditions; its extensive multi-client library providing multi-year potential and a focus on high-impact drilling areas or areas of high lease turnover, we will be able to expand our services, accelerate our entrance into the multi-client business and enhance our position within the seismic contractor industry.

"We expect the combined company to be better positioned to serve our expanded customer base as we will have an enhanced ability to redeploy assets into more attractive markets. Our increased number of crews should also provide longer term contract opportunities with fewer mobilizations which should result in better utilization and profitability. In addition, PGS has invested over $130 million over the last three years in their 5,500 square miles of multi-client library data and multi-client technical capabilities, and we believe this high quality resource will place us in an important segment of the market in which we have not previously participated in a meaningful way.

"Finally, we look forward to PGS becoming a large shareholder in Geokinetics, as we believe this will provide numerous opportunities going forward and should benefit both companies. We are eager to welcome the PGS Onshore employees into Geokinetics, and look forward to building a stronger, more competitive business," concluded Mr. Miles.

Jon Erik Reinhardsen, President and Chief Executive Officer of Petroleum Geo-Services commented, "The combination of PGS' and Geokinetics' competence and market presence will create a new force in the onshore seismic industry. As a future key shareholder, we are excited about the growth potential and leading market position of the new Geokinetics. This transaction adds value for our shareholders, our employees and our customers."

Mr. Reinhardsen continues, "At the same time, this transaction establishes PGS as a focused marine geophysical company. The strengthened financial position of PGS will further allow us to continue to develop the most efficient fleet and leading edge technology in the industry."

Following the closing of the transaction, PGS will become Geokinetics' second-largest shareholder after Avista Capital Partners. The acquisition is expected to provide annual synergies in excess of $10 million, driven mainly by organizational streamlining and cost reductions.

There may be additional synergies via cross-selling opportunities and additional opportunities for processing behind Geokinetics' expanded number of crews. Geokinetics expects to begin to capitalize on these synergies in mid-2010 as the Company starts to benefit from the integration of the two businesses.

Geokinetics has agreed to finance this acquisition through a combination of cash and common stock. At closing, Geokinetics will issue PGS approximately 2.15 million shares, which represents 19.9% of Geokinetics current number of shares outstanding prior to this issuance, valued for purposes of the transaction at $12.11 per share or $26.1 million. The remainder of the purchase price or $183.9 million will be paid in cash. The Company will have until February 15, 2010 to close the transaction.

The Company has received a bridge financing commitment from RBC Capital Markets Corporation and in addition, Geokinetics will also explore various capital markets financing transactions prior to closing.

In conjunction with the financing of this transaction, Geokinetics expects to repay the majority, if not all, of its existing outstanding debt including its revolving credit facility, capital leases and equipment financings. RBC Capital Markets Corporation served as Geokinetics' exclusive financial advisor for this transaction, while Pareto Securities served as advisor to PGS.

In connection with the transaction, the Company has amended its Preferred Stock to facilitate the financing of the transaction as follows. The Company's Series B-1 Preferred Stock has been amended to, among other things, extend the date that its holders may call for mandatory redemption and the date through which the Company can elect to pay dividends in kind to a date to be determined between December 2015 and March 31, 2016, with the exact date to be determined at the completion of the financing transactions mentioned above. In addition, the coupon on the Series B-1 Preferred Stock has been amended from 8% to 9 3/4% and the conversion price has been adjusted from $25 to $20, subject to certain restrictions. The Company's Series B-2 Preferred Stock will be exchanged for a new Redeemable Preferred Stock with no common stock conversion feature. This redeemable preferred stock will have a coupon of approximately 12%, and will be redeemable at a date to be determined between December 2015 and March 31, 2016, with the exact date and coupon to be determined at the completion of the financing transactions mentioned above. Dividends will be paid in cash or, if the Company is restricted from paying such dividends, may accrue up to redemption. In addition, the Company will issue the holders of its Series B-2 preferred stock 750,000 shares of its common stock as consideration for the amendments above.



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